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Edited Transcript of SKF.AX earnings conference call or presentation 29-Jul-19 12:30am GMT

Q4 2019 Skyfii Ltd Earnings Call

Nov 25, 2019 (Thomson StreetEvents) -- Edited Transcript of Skyfii Ltd earnings conference call or presentation Monday, July 29, 2019 at 12:30:00am GMT

TEXT version of Transcript

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Corporate Participants

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* John Rankin

Skyfii Limited - COO & MD of ANZ

* Wayne Arthur

Skyfii Limited - Co-Founder, CEO, MD & Executive Director

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Conference Call Participants

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* Owen Humphries

Canaccord Genuity Corp., Research Division - Senior Industrials Analyst

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Presentation

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Operator [1]

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Thank you for standing by, and welcome to the Skyfii results call. (Operator Instructions) I would now like to hand the conference over to Mr. Wayne Arthur, CEO. Please go ahead.

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [2]

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Thank you. Good morning. And thank you all for making the time to join us today. Welcome to the Financial Year 2019 Fourth Quarter Results Presentation for Skyfii. I'm joined today by Skyfii's Chairman, Andrew Johnson; Skyfii's Chief Operating Officer, John Rankin; and our Investor Relations consultant, Craig Sainsbury.

We're really excited to take you through what has been another fantastic quarter's performance for the company. We simply continue to grow from strength to strength. We have also successfully closed out on the financial year 2019 having delivered against all of our key stated objectives.

Before we dive into the detail in Q4 in particular, I'd like to call out some key highlights delivered during the financial year 2019.

Firstly, the company continues to grow both its top line and, most importantly, its recurring revenues at a very healthy rate, delivering a 52% growth in both top line and recurring in FY '19 versus FY '18. We added a significant number of new clients to the already extensive Skyfii enterprise customer base. And with the acquisition of Beonic, we can now include new names, such as AMP, QIC, ISPT, Lend Lease and David Jones to mention a few.

We continue to grow revenues and convert new contracts within our U.K., EMEA and Brazil markets. We have begun to successfully penetrate the U.S. market, and in particular, the retail property vertical, having secured contracts with Cafaro Property Group, Trademark Property Group and, just this last quarter, Tanger Outlet Centers, a leading active mall property group in North America

Per our stated strategy, we continue to invest into our operating model to continue our revenue growth, whilst still delivering a positive EBITDA and strong cash position for the year end.

And finally, post the end of the financial year, the company successfully negotiated, concluded and began to integrate a new complementary acquisition in Beonic Technologies.

Moving to Slide #2. By way of agenda, I'll begin by talking through a brief overview of the company, including how we are globally leading the category of omnidata intelligence. I'll also talk in more detail through key operating highlights delivered during the quarter, and I'll close with a view on the very strong outlook for Skyfii in FY '20. John Rankin will speak directly to the key financial highlights delivered during both the quarter and overall for the full year.

Moving to Slide 4. The company saw no material change in its quoted shares outstanding pool during the fourth quarter of FY '19. We concluded the quarter with cash at bank of $1.33 million, which was up from $1.2 million at the end of the previous quarter.

Moving to Slide 5. As we conclude the financial year, I wanted to take the opportunity to remind shareholders of the very dedicated team behind Skyfii. Our executive team, many of whom have worked together since the company's inception, is a tight fit for purpose group of executives who each alongside their executive responsibilities, carries a significant global responsibility.

Our Board also fit for purpose, have been extremely engaged and the company has benefited greatly from the appointment of firstly, Andrew Johnson in the new role of Chairman and our 2 newly appointed nonexecutive directors in financial year '19, Jon Adgemis and Sue O'Malley.

Moving to Slide #6. During the quarterly presentation for Q3, we first introduced a category called omnidata intelligence, which is a category that Skyfii operates in and is leading globally. This category best defines our biggest offering, soon to be first of the practice of collecting, analyzing and actioning data from a multitude of data sets, currently and typically inherent within physical and digital spaces today.

We believe that for any of our current and prospective customers, the pathway to a successful data strategy require the combination of 3 key elements: firstly, the right data; secondly, intelligent technology; and thirdly, experienced people.

And on Slides 9 through 20, I'm going to explain how this works in practice and pivotal role that Skyfii's business plays in helping physical venues deliver value through their data.

Moving to Slide 9. As our shareholders would know well now, Skyfii is the only company within its group which has the technology and the track record capable of ingesting data from more than just WiFi data. This has been a critical point of differentiation for Skyfii as we have successfully diversified our data ecosystem to allow for better insight, more accurate locationing, a wider variety of vertical targets and to be able to go much, much deeper with our customers' interchangeable business outcomes.

It has also provided us with a defendable position within our market since we are not singularly reliant on just 1 data source only. The recent acquisition of Beonic Technologies supports this omnidata intelligence strategy, which will allow us to grow our reach of physical venues and verticals and add more revenue generating opportunities to our existing customer base. There is a lot of data out there and the ability for customers to determine what is the right data can be a very tricky decision for most enterprise companies. In fact, according to Gartner, up to 85% of big data initiatives fail. This is exactly why Skyfii exists, to help these customers harness the right data and deliver against a successful data strategy.

Moving to Slide 11, Intelligent Technology. Data is often meaningless unless it can be captured, analyzed and visualized in a form that delivers insights or action for a business. This is why Skyfii's IO platform is such a critical tool for our customers, most of whom are not technology companies and, therefore, do not traditionally possess the in-house capability to collect, analyze, visualize and often action their data.

Skyfii's suite of Software-as-a-Service products: Connect, which refers to our data collection and centralization product; Insights, which is our BI dashboard and automated reported product; Engage, which is our multichannel marketing product suite and our recently launched IO Labs product, which is our research and innovation environment. Each contributes to a different stage of the customer data journey and often buying life cycle.

So if we move to Slide #13. The fact that Skyfii's platform is also modular, allows us to essentially tailor our offering for each customer based specifically on which part of their data journey they're currently on. In the majority of cases, our customers will start with our guest WiFi product as a means to collecting data, and typically they then move up the value chain into our other products over time.

Starting with our most basic product allows us the opportunity to get to understand the customer's data ecosystem, their objectives, so we can capably deliver value in a sustainable way and for the long term.

Our fairly new offering in the realm of people counting and the launch of our new IO Labs product have both been very well received by the market and we expect to see good growth in both current and prospective customers through these 2 product lines, particularly in financial year '20.

Moving to Slide 14. Further to my explanation of the different stages of the customer's buying cycle. Businesses typically use Skyfii's IO platform in 3 phases: Phase 1, first and most importantly, we help our customers to establish a baseline on their current visitor metrics using the technology infrastructure they already have, and typically we start with only WiFi data as the baseline. This is on Slide 15. This allows for 3 things. #1, we don't need to get caught up in any hardware and physical infrastructure changes, which speeds up the sales cycle; #2, we help them to realize value from an existing technology investment; and three, we help them to establish a solid baseline on how people are using and interacting with their venue, which allows them to begin to understand and benchmark behavior and venue performance.

On Slide 16. Phase 2, we add context to the baseline through the addition of other data sources, such as people counter data, mobile data, weather data or point-of-sale transaction data. This additional context allows us to map behavior against things like weather, product sales, marketing initiatives and even layout, staffing or retail mix changes in order to better predict future customer behavior.

And finally, Phase 3 on Slide 17. Once we have integrated the various contextual data sources into the single view for the customer and we have begun to report on key visitor metrics and behavior, the final step is to begin to use the baseline data to better engage with customers and begin to drive action. Many of our customers see step 3 or Phase 3 as the desired end goal, since it allows them to begin a meaningful conversation with their customers. Most use our engage tool for delivering surveys, often to better understand things like customer sentiment. Others use it to measure the impact of marketing initiatives or simply to understand the impact of change.

Moving to Slide 18. The final piece to solving the big data puzzle is to ensure you have the right people with the appropriate experience to be able to decipher the data, understand the patterns and capably deliver insights to your business through the data.

On Slide 19, Skyfii's services team, which consists of highly experienced data scientists, digital strategists and PhDs was formed because we realized that many of our customers did not have the right experience within the organization to harness the value in the data that we're gathering. So our team works alongside many of our customers to assist them in delivering tangible outcomes through things like customized research, assisting to develop the right data strategy overall or sometimes through data engineering, to help customers match their current data stack to their stated objectives.

Moving to Slide 21. Key operating highlights. During the fourth quarter, we delivered on 3 key new milestones. First, we extended our already dominant position in the retail property vertical to include Fortius Asset Management's retail property portfolio on a 3-year contract for both our IO Connect and IO Insight product modules.

Secondly, we welcomed the globally iconic Sydney Cricket Ground to our list of enterprise customers, securing a 5-year initial contract for IO Connect and IO Insight and further establishing Skyfii as a key player in the stadium vertical.

And finally, post the end of the quarter, we concluded the acquisition and began the integration of Beonic Technologies, which I'll outline in more detail on Slide 22.

On the 9th of July, we announced the completion of the acquisition of Beonic, a customer insight solution provider, specializing in sophisticated camera and people counting technology. And last, we have only been in position of the business for a short period of time. We're very pleased to say that we have been very impressed with the caliber of the Beonic team, particularly in the field of engineering, and also very impressed by the quality of the Beonic, now Skyfii, customer base. The transaction was completed on a very favorable multiple of a little over 1x recurring revenues and is an extension of our existing platform capability of ingesting and delivering insights as well as providing managed services around camera and people counting technology.

The Beonic revenue model mirrors that of Skyfii, generating recurring revenues on a 1- to 3-year subscriptions, providing managed services and also the deployment of sophisticated camera technology our way of capital projects.

Their customer base includes many household Australian and international brand names, such as Westfield, David Jones, AMP, QIC, Dexus, New Balance, L'Oreal, Melbourne City Council and Charter Hall to name a few, all of whom are highly relevant targets to Skyfii's complementary products and services and in some cases, our existing customers. The plan over the coming 12 to 18 months is to migrate the Beonic customer base across to the IO platform with migration having already commenced on a number of key clients.

In parallel, we will be progressively introducing Beonic's customers to the breadth and depth of the Skyfii products and service offering, targeting revenues from increased sell-through of products and services. We believe hard synergies will be realized in the first 12 months of operation, and we have already guided investors to expect a pro forma 27% uplift in our current recurring revenues on financial year '20 from existing Beonic contracts alone.

On a final note, the acquisition has established a strong foundation to expand the camera and people counting product and services lines into our international markets, which is one of our stated objectives for financial year '20.

Slide 23. Our global customer enterprise portfolio has again continued to grow this quarter, further broadening our vertical reach and also further entrenching our market-leading position within several key verticals globally. The new customer contracts and the acquisition of Beonic will add several new brands to our enterprise customer base, and we're extremely excited about the growth in new and existing verticals through our omnidata intelligence approach in financial year '20.

I'll now hand you over to John Rankin, Skyfii's Chief Operating Officer, to talk to the key financial highlights delivered during the quarter and for the full year.

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John Rankin, Skyfii Limited - COO & MD of ANZ [3]

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Thanks, Wayne. So moving to the financial highlights. We'll move to Slide 25.

Firstly, a quick refresh on how Skyfii generates revenues. We report revenues -- revenue lines in 3 ways: firstly, recurring revenues, which are generated from ongoing subscription fees for access to Skyfii's IO platform. Recurring revenues are charged as a fixed fee per venue per month typically contracted on 3- to 5-year terms.

Secondly, services revenues, which are generated from the payment of projects undertaken by both Skyfii's data consulting services and marketing services divisions. And thirdly, nonrecurring revenues, which are made up of one-off fees generated from the deployment of hardware and infrastructure, which underpins our recurring revenue, gross and subscriptions to IO platform. These include the installation of WiFi infrastructure, 2D and 3D camera, and people counting technology.

Moving to slide -- to the next slide, full year financial '19 highlights. Before we start, I want to confirm that no revenues from the Beonic acquisition are included in FY '19 results. The deal was completed post 30 June, and therefore, will be evident in our numbers from Q1 onwards.

To begin, Skyfii has delivered another outstanding full year result with total operating revenues of $9.4 million, up 52% year-on-year. Our recurring revenues also grew at a similar rate, up 50% year-on-year at $5.2 million, which is a great result and testament to the momentum the company is delivering across all operating regions.

At the EBITDA line, the company delivered a positive operating EBITDA of $0.6 million for the full year, and whilst the company did experience mild dip in our operating EBITDA in the second half, that result can mainly be attributed to an increase in corporate costs related to the Beonic acquisition and an increase in head count costs specifically relating to engineering and international expansion.

As Wayne stated in his introduction, maintaining a positive EBITDA for the full year FY '19 was a key milestone set and announced by the business 12 months ago. We are very pleased that this milestone has been met and should provide our investors with confidence as we continue to invest for growth.

Cash position and cost management. At the end of the quarter, the company held a cash position of $1.33 million, up from $1.2 million from the previous quarter ending 31 March.

And in May, the company announced it had secured a $2 million loan facility, which was a response in increasing need for working capital as a result of the acquisition of Beonic and to further support a high growth rate. The company remains focused on managing our cost base relative to our revenue growth with the drawdown facility providing access to capital as and when required.

Moving to the next slide, Q4 results. Total operating revenues in Q4 of $2.45 million represented a 9% increase on the prior quarter and represents our fastest-growing quarter-to-date. Revenues generated from services of $700,000 represented a 10% increase on the prior quarter, a result that can be attributed to the efforts to internationalize our data science and professional services offering.

Revenues generated from subscriptions to the IO platform were up 14%, having delivered $1.52 million in recurring revenues. That provides the company with a net monthly exit run rate of $0.5 million, a strong foundation for FY '20.

So in summary, strong full year results with both the total operating revenues and recurring revenues up 50%, strong Q4 results with recurring revenues up 14% quarter-on-quarter, and the business maintained a positive operating EBITDA consistent with our guidance across the full year FY '19.

Looking ahead to the current quarter, the business is confident in delivering strong organic growth and inorganic growth in line with the recent acquisition of Beonic.

Thanks, Wayne.

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [4]

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Thank you very much, John. And a personal congratulations to yourself, Koreen and the investor team for another very strong financial and operating performance for the quarter and an extremely strong year overall.

We certainly set ourselves up for Skyfii's best year yet in financial year '20 with $6 million in recurring revenues already booked and a healthy pipeline of prospects already progressed for the year.

In closing, I would like to present an outlook statement for the remainder of financial year '20 on Slide 29. The company has concluded financial year '19, having delivered, as John mentioned, a 52% top line revenue in recurring revenue uplift when compared to financial year '18.

And we start FY '20 with $6 million in recurring revenues booked and a very high level of confidence in an additional $1.5 million in recurrings from the Beonic acquisition. It is our expectation that the company will continue to grow its organic revenues at a similar if not accelerated rate to FY '19 with the Beonic revenues and Beonic growth to come in and layer over the top of that. The company has firmly established its presence now in the U.S. market, having delivered small but meaningful wins in FY '19, and it expects to see a strong contribution from North America and the EMEA regions in FY '20 alongside continued growth from ANZ, Brazil and South Africa.

Our specific areas of focus for the FY '20 year will include, conversion of key contracts within our international markets, delivering strong top line and recurring revenues across all regions, maintaining a focus on cash management and maintaining a positive EBITDA position. We intend to fully integrate the Beonic people counting business, and we'll expand the offering into the U.K., the U.S. and Brazil markets.

We plan to increase and continue to grow the number of datasets represented in the IO platform to continue to diversify ourselves from our peers and to create the opportunity for new IO product lines in the coming year. And we will further build out our partnership ecosystem specifically, with key global partnerships with managed service providers.

And with that, I thank you for your time today. I know it was a little bit longer than usual, and I would now like to hand back to the moderator to facilitate our Q&A session.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question comes from Owen Humphries with Canaccord Genuity.

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Owen Humphries, Canaccord Genuity Corp., Research Division - Senior Industrials Analyst [2]

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Wayne and John, congratulations on a cracking quarter, particularly that fourth quarter looks it's -- the EBIT -- fourth quarter looks like growth accelerating. Can I just touch on just on the IRR uplift. I imagine most of that upgrowth that you're delivering is all volume growth, i.e., customer contracts. There's no plus growth that you're putting through your platform. Is that right?

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [3]

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That's correct, yes.

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Owen Humphries, Canaccord Genuity Corp., Research Division - Senior Industrials Analyst [4]

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Okay. And just -- maybe just go in a bit more detail. When you're signing up these new customers? What proportion are you actually taking up the kind of new data sources or [payable accounting] the or other data layers inside your platform over WiFi? Is it a very high conversion rate on the prolific data sources?

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [5]

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Sure. No. It's a good question, Owen. So look, its better said that the vast majority 95% of our customers are still starting as I mentioned with the connected insight products initially. With about somewhere between 15% or 20% of our current customers now are subscribing to the engaged module, and somewhere around 5%, maybe as high as 7% or 8% are starting to come through in terms of people counting. So certainly people counters, IO Labs and Engage are still the up-sell opportunity for us across BOOM contract. And most of our contracts will start with Connect and Insight. But what I will say is that since we started to -- obviously we're very new in terms of the acquisition and integration of Beonic, but we've had a lot of international and local inbound inquiries around that people counting piece predominantly, because it's now something that these customers can integrate across their WiFi analytics, so the correlation of the 2 is -- it seems to be where the goal is.

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Owen Humphries, Canaccord Genuity Corp., Research Division - Senior Industrials Analyst [6]

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Got you. Okay. Good one. And just maybe as your platform gets, I guess, more comprehensive, is signing a deal size that you're signing up now larger than what it was say 2 or 3 years ago, is the size and the extent of the contracts with your partners, is the ARPU going up, you would say? Or is it pretty constant?

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [7]

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Yes -- no, it's definitely going up. The size of the deals are definitely larger. Some of our contract value is definitely much larger now than and seems to continue to grow, particularly in our more mature markets, obviously. Our margins are growing as well. Obviously, we're starting to see some efficiencies now in terms of that data storage piece, particularly. And most of our investment in R&D in the product is in people and head count. So some margins are growing as well. So absolutely.

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Owen Humphries, Canaccord Genuity Corp., Research Division - Senior Industrials Analyst [8]

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Or maybe just on that. So next year, you've got -- you're growing your revenues strongly at pretty healthy gross profit margins. But you're kind of flagging that your earnings are going to be relatively flat year-on-year, which I calculate to be $2 million or $3 million delta in head count. Can you just maybe highlight like that check we get maybe 20 or 30 people. Did you just flag where those people are going to be going? Is it more sales U.S.? Or is it sales global? Is it more R&D? It's actually highlighting doing more direct sales and marketing is, to illustrate where the reinvestment will be.

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [9]

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Yes, sure, sure. So definitely the home market of let's say the home market of ANZ, we are increasing some of the head count R&D just to continue to keep our product ahead of market. And obviously as I mentioned, one of the objectives is to integrate additional data sources, so some additional support for the product in the R&D facility. We are going to be investing a significant amount more in marketing this coming year, so that's a lot out, and we'll definitely be growing, and that's again part of our strategy to -- we've definitely been very much a sales-focused organization to this point, marketing has been something that we have under indexed on and we're going to be investing appropriately around for next year.

And then in terms of specific head count, we are going to be investing in international markets. we -- the financial year '19 very much was about putting some more head count and establishing more of a presence in the U.S., in the U.K. markets and we place those bets, we put those head counts in, we'll continue to do that, but we're expecting to start to see a meaningful contribution from those international markets next year. So and those head counts are predominantly in the sales function, so sales -- direct sales but also in sales support functions, customer success and sales engineering.

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Operator [10]

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(Operator Instructions) We are showing no further questions at this time. I'll now hand back to Mr. Arthur for closing remarks.

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Wayne Arthur, Skyfii Limited - Co-Founder, CEO, MD & Executive Director [11]

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Well, thank you, again, everybody, for your time. We were aware, it was a little -- a few minutes longer than usual, but we're really excited about not just the results for the quarter but what the foundation looks like for financial year '20. So thank you for your time. Thank you for being patient shareholders. This is going to be another fantastic year for us, and we're excited to meet you altogether at the next quarterly results presentation. So thank you.