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Edited Transcript of INFRNT.OL earnings conference call or presentation 22-Aug-19 8:00am GMT

Q2 2019 Infront ASA Earnings Call

Sep 8, 2019 (Thomson StreetEvents) -- Edited Transcript of Infront ASA earnings conference call or presentation Thursday, August 22, 2019 at 8:00:00am 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 Q2 2019 results. With us today, we have CEO, Kristian Nesbak; and CFO, Max Hofer. Over to Oslo.

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

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Hello, good morning, and welcome to this presentation, and thanks for attending. So this time, we delivered a really strong quarter where we are delivering both on the M&A strategy and the underlying revenue growth. So the acquisition of vwd in Germany was completed and has secured our top 3 financial terminal provider position in Europe. The revenue is up (sic) [at] NOK 105 million, up 56% from NOK 68 million in Q2 2018. So this includes Market Connect -- the Market Connect acquisition in Italy, but it does not include vwd. And the growth is, of course, driven by the Market Connect acquisition, but we can all -- we have also quite strong organic growth. And the adjusted EBITDA is -- ended up at NOK 20 million compared to NOK 10 million year-on-year. Customer base doubled year-on-year, measured by paying terminals and solutions users after we included Infront Italy or Market Connect that we acquired.

So we finalized the vwd acquisition in July, this summer. The final purchase price was EUR 130 million. This was financed through a 4-year EUR 105 million bond. And we had an oversubscribed subscription right in June. As I mentioned, the vwd numbers are not in the Q2 numbers, which will be a part of the next reporting, the Q3.

So after the acquisition of vwd, we will be the leading European provider of financial terminals and market data. We will have a #2 position after Bloomberg in the Nordics, so this is a non-European player. And we will have a more diversified revenue base now with 90,000 professional users split on 3,600 customers, a broader product offering and more markets. It's a highly complementary operation with significant cross- and upselling opportunities. We will be exposed to the growing regulatory technology segment and wealth and asset segment markets. We will have more than 500 employees in 14 countries. And this will give us a fantastic platform to grow across Europe and in other markets.

The integration of Infront and vwd is underway. So we have set up an integration team and started working on all elements of the integration. The first and -- the first thing we will do and the lowest hanging fruit is to consolidate data feeds. This will give us an annual cost saving of NOK 20 million, and we are -- have a good traction there. Further, we estimate to have a cost saving of NOK 60 million to NOK 85 million over the next years. So this will take us a little longer time to realize, but it will happen.

So our strategy is still the same. We have reached our goal a lot earlier than we expected. So -- but so we might need to change that now. But we are still the -- I mean, the way to grow is still the same. So we will -- one, we continue to grow on the number of terminal users in the Nordic and has increased our income from the solution business. Two, we see an uptick of leads coming in from outside of Nordic and increased success rate in the sales cases. Our offices outside the Nordics are picking up speed. Three, having a user-friendly, function-rich and content-wise solution is our top priority, and we continue to invest heavily in product development. Four, in the long term, we will continue to do acquisitions.

So as I mentioned earlier, the number of paying professional users has more than doubled due to the acquisition of Market Connect in Italy. Web technology agreements continue to grow through new clients in the Nordic, and the revenue in this segment is NOK 81.8 million, so it's up 82% year-on-year.

We also have strong growth for Analytics and Other and overall stable development for News. So the News division revenue is more or less flat. 85% of the segment revenue is in Swedish krone. Direkt, again, voted best financial news wire in Sweden. And we see strong interest for the new Insight Direkt news service in Sweden. And in Norway, the News agency Infront TDN showed good momentum, launching new products. The Analytics and Other division revenue increased with 11%. It's mainly organic growth. And the analytics platform now report quarterly and annual earnings estimates for around 1,200 companies across Europe.

And now over to our CFO, Max Hofer, to go a little bit in details on the financial data. Thank you.

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

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Thank you, Kristian. I will now continue with the financial review for the second quarter. As you have already seen, the second quarter has been truly exceptional for Infront, not only did we sign the vwd transaction and through that we are becoming the #3 player in Europe, but also we have seen record revenues and EBITDA in the quarter. As our business is based on longstanding customer relationships and subscriptions, 99% of our revenue was actually recurring, of course, helping us with respect to visibility of the business going forward. The adjusted EBITDA of NOK 20.8 million compares to NOK 10.7 million last year, and the margin of 19.7% is very positive as well as we see that our efforts to consolidate data supplies and to integrate the Italian business are seeing the first results.

In the second quarter 2019, the group's revenues recorded at NOK 105.9 million. This compares to NOK 68.1 million last year, and of course, the majority of this is driven by the acquisition of the Italian business. Furthermore, we also recorded healthy organic growth in the high single digits, and this is coming from both the web technology solutions, but also other products and our terminal product as well is selling well, and we have been able to also upgrade a significant amount of users to our improved and newer product suites as well. The gross margin is slowly ticking up again after the hit of the inclusion of the Italian business. And here, it's clear that we can see the effects of the data consolidation efforts going on. And now we record a gross margin of 61.6%.

The adjusted OpEx came in at NOK 85.1 million compared to NOK 57.4 million last year. And of course, here as well, we see the impact of the Italian business. I also want to point out that we have been able to stabilize the cost development between Q1 and Q2, and of course, this bodes well for the ongoing future of the EBITDA and profitability development. As you can see in the second quarter, the EBITDA came in at NOK 20.8 million and the margin as mentioned, was at almost 20%.

Looking at the revenue development per region. We can see a slight decrease in revenue in Norway year-on-year. This is due to the loss of a contract in non-core business and the rest of the business is very stable. In Sweden, we see an increase to NOK 37.8 million and this is driven by the inclusion of new web technology solutions as well as organic growth in core products. Other regions now include Italy and it has seen, of course, a very high increase year-on-year and a stable development quarter-on-quarter.

Looking at the revenues per segment. Terminals and Solutions now includes as well Italy and we have seen a stable development quarter-on-quarter. And the other divisions, News and Analytics, have performed stable as well, in total, of course, a good increase year-on-year and a slight increase also quarter-on-quarter.

At the end of Q2, the company was flush with cash. Of course, this is the effect of fundraising efforts and the bond that has been raised, the EUR 105 million bond, and as well the new equity that we raised of NOK 242 million. The effect of that can be seen in the cash flow from financing, which was at around NOK 1.2 billion. And these proceeds were then used in Q3 in the closing of the transaction.

The cash flow from operations was at NOK 1.1 million as positive operating cash flow in -- across the regions was offset basically by seasonality effects in Italy. In Italy, our company invoices a majority of its revenues once a year. And that happens in Q2, at the end of Q2. It has to be said that all of this invoicing is upfront invoicing and hence, we can very clearly also manage those receivables, those customer relationships. The cash flow from investments was negative NOK 16.6 million, relating mostly to development of future products and also some investments in PP&E.

In summary, and as also mentioned by Kristian, Infront has now achieved its target of becoming the leading European provider of financial information to financial -- to finance professionals, and this is due to our acquisitions of Market Connect and vwd. And our focus going forward now will be to continue our integration efforts to capture the significant synergies from these transactions. So far, our experience is that the integration is going well. We have identified significant cost savings and also secured a big chunk of the data cost savings that we had identified initially.

The group is also seeing continued revenue growth based on recurring subscriptions as we see a healthy demand for our products. And we have been able to increase the number of users and are able to also sell at higher price points. The sales pipeline remains solid across all regions. As we now also see, of course, that with the inclusion of vwd, we should be able to increase our cross- and upselling efforts. All of this supports very strongly our long-term ambitions regarding organic growth.

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

Thanks again for your continued interest, and we will be back with Q3 on November 14.