Crunchfish AB (publ) (CFISH) Earnings Call Transcript & Summary

Hi, everyone, and welcome to Vastra Hamnen Corporate Finance analyst session in which we will discuss Crunchfish's latest report. And I'm standing here with the CEO, Joachim Samuelsson. We very much welcome you, Joachim.

Thank you.

Let's start again. Okay. Let's go. The latest report, Joachim. A lot was going on when last we spoke. And so it will be very interesting to hear where things stand now. This time, I'd like to focus on the market focus -- market update section of your report. But let's start with the financials. The figures in Q2 were largely as expected. Net revenue was low, but we forecast that you will enter into an agreement this year that will start generating some revenue. Are we too optimistic? Or how would you comment on the sales development?

When you say are we too optimistic, is that in terms of generating sales?

Generating sales...

I would -- I think it's reasonable. I think what has certainly happened this quarter is that a lot of the opportunities have moved from looking at does the product work, technically verifying it into commercial discussions. We've certainly started discussing commercials with RBI and MPCI for India. We are moved significantly for GCash. There, we are discussing the commercials in parallel with the technical trial agreement that we've signed. And then there is also good movements in the Caribbean for a CBDC project as well. So to expect revenue this year, yes, we certainly do that.

Okay. Yes. I'll come back to all those projects in just a bit. But let me ask you about the cash situation. The operating cash flow in Q2 was about minus SEK 4.6 million and the cash balance ended at 13 million. Given these figures, it would appear as if you would need a major deal or a deal or external financing of some sort for year-end. What are your thoughts on the financial planning?

But you're right that we did in Q2, the rights issue, which was -- the Chairman and myself, we subscribed for it, the whole thing, and then it was oversubscribed and that strengthened the financial position in the company considerably just before the summer. But we are looking into the financials. We certainly are. And it is coming from commercial that is the main -- what we need to live on is the commercial contracts. The other one is the strategic investor project that we have looked at as well. And I think these 2 projects or these 2 revenue streams that are, in a way, helping each other. If we are getting sales traction, it will be much more easy to attract strategic investors as well in parallel. But I don't think it's binary that, like you say, I think there are -- yes, we're aware of the financial situation, and we are considering our options what we do. The main thing we want to do is to sign deals, as you said, major deals in order to leave those financial discussions behind us.

Yes. I mean, in connection with the rights issue, Chairman Corporate Finance was engaged to attract new strategic investors. Are there any updates on this process?

Well, it's ongoing. It's been a little bit on the slow side due to summer vacation. This is -- but we are working on that, and we are I think what has happened is that our financial situation is sort of stronger, as I said. We have moved forward quite a lot with the commercial discussions in many of those opportunities we have at hand. And I would also say that the fact that we got a patent approved in India is also looking -- making the whole situation look stronger for us. So that helps in the dialogues that Olof from CMS is sort of having in the market.

Yes. Yes, that's my next question actually because I'd like to turn to the market situation now and your position. I mean, as you described in the report, you have shown that your solution works. It's a title of your CEO statement from proof to position.

Yes.

Have you done any updates on your offering?

No. Technically, it's sort of the same product. So we are doing work on it always. But technically, it's sort of still very much the same product. I think what is becoming clear, and this is how -- why we are structuring in a way, the market update in -- on the system level, we really understand that we need to be part of the system. That is sort of one level. And then on the service level, the ones that are serving end users like you and me, so we can pay even offline, that's another level. And we are we're working that way. But it's not the product itself that has sort of changed. It's sort of our go-to-market. It's clearly structured in those 2 components, and we're very aware of that. And I think that's a necessity in order to go to market with an offline product like we have.

I'd also like to encourage all viewers to send in your questions in the chat function in this webinar, so we can address them as we go along. But first, let's address the India patent, which was a milestone for you. Has this changed how you discuss with RBI and NPCI and banks?

Yes, I would say yes because I think it changes before it was that let's try our technology for the market as a vendor-neutral system-level architecture. And then later, we can bring in service providers who could deliver an offline wallet on that system. When we were -- we've been in a way, working closely with the system operator, NPCI to set this up. And the specs are ready. We are ready to go to the banks as well. But I think what has changed is that we are not just a sort of a technology provider. Now we are a technology provider we have rights to the architecture.

You have like a business proposal now?

Well, yes, we are -- we've had several discussions actually during this months since we last spoke here, with RBI as well as with NPCI. And RBI has -- we've asked them because it's their product. Initially here, we're talking about the digital rupee. Are you our counterparty for sourcing in our technology or is it NPCI. And we've been directed to that we should have the commercial discussion with NPCI. That's what we had. But we are -- we're still having conversations with RBI, keeping them abreast of what is happening in our discussions with NPCI. There is a meeting -- probably 2 meetings with RBI plan for just to the end of the month. So we are -- and then GFF is coming up, the global fintech fest early September, where we have a good chance to meet in person as well with both people from NPCI as well as RBI as well as the banking community that is supposed to implement off-line wallets as well.

Yes. So the project that you were running with the the 2 banks -- is it -- is it completed? Or where are you now in that process?

The project is -- what we are doing is that we have -- we're running it with -- it's 2 separate things in a way, it's an infrastructural thing with NPCI. That is 1 level, that's the service level -- or sorry, system level in order to have the technology that the system can accept and process off-line payments. That's the system level. On the service level, then the idea is that we have -- and we have signed agreements we've got 2 banks there, IDFC and Axis Bank and that's also progressed. We've signed a technical trial agreement with Axis during the quarter here. And IDFC, the other bank is our customers since before as well. But they are -- they need the specification on the system level in order for them to be able to integrate sort of the work...

Needs to be completed first and then...

Yes. It needs to be a system level first, and that's what we've been working with for a long time. And now I think partially with the patent as well. But also the work we've done is that we are asking sort of compensation on a -- system level compensation for all the work we've done and the fact that it is using our intellectual property here on the Indian market.

So things are progressing in India.

Yes, they are.

Should we move on to the Philippines, perhaps. You mentioned GCash. How close are you for dealing with GCash or the Philippines?

The Philippines has developed in a really good way during this 3 months as well. GCash does a very -- they have a very structured process. When we spoke last time, we had positive signs from their product team and the technical team that they wanted to go ahead with us. But then they have now put us into their what they call the innovation team, which are the ones that prepare new innovation for the GCash solution. So we are working with them closely. We've signed an agreement for what will now happen in terms of test technical testing. But in parallel, we've also given them commercial proposals as well, which they have -- yes, they wanted to have 1 clarification last week, and we have sent on that. So this is what I think is good that we are progressing not just try it out if it works, but also we are at the stage of commercial discussions as well. We've also had -- this was coordinated by the Central Bank of the Philippines, they call BSP. And they brought together the whole ecosystem. So the banks, the payment networks, the equivalent of Swish, which is called InstaPay, they brought all together and discussed that we believe from the central bank perspective, that this solution that Crunchfish is coming with is very important for the Filipino market. And then all these -- this whole ecosystem had a chance to say, what do you think in front of the Central Bank? And they all said -- they all agree. This is -- I would say this is -- as we -- I think we've discussed before, this is this is sort of for the whole Philippines, all and going for our technology, which is extremely encouraging, almost like we're now doing in India. But what's good with GCash is that they are a front runner is like a closed-loop wallet is 1 management and they control...

And they can do and make the decision irrespective of the infrastructure.

Yes. And the -- this is the plan that they want to do that. They have 80 million -- Filipinos have their wallet, the GCash wallet is just like in Sweden, with Swish, everybody sort of have switch on their phones, everybody has GCash in a way. And they have also a very strong network of merchants that can accept those payments. So Gcash can move independently on their own. And we think they're going to be a fast track for us, and that's going well. But I'm also very encouraged that the Central Bank is taking this so seriously and coordinating sort of with them and mentioning this opportunity with the govern offline for the Filipino market and sort of drives in a way, the project. But I do expect that, that will take longer time to get the whole ecosystem behind it than just doing it with 1 player like Gcash. So -- but it's Philippines has developed positively in sort of 2 ways, both on a single wallet level, but also ecosystem wise. So it's been a good -- I think the Philippines has developed well.

Okay. That's good. Let's turn to the Caribbean.

Caribbean, yes, we travel the world Globe trotters.

Where are you in this process?

Yes, we wrote in the Q2 report that we are expecting in the Q3 a Board decision. It's not a done deal yet, but everything points in our direction. I think the Board has taken some sort of principal decision in our favor. But it's still -- there is still some clarifications that the Board have asked the management team to sort out. We had a meeting yesterday quite late actually. And there is another one on Monday. So we are sorting out the details now. It's still we have to discuss about contracts and things like that. But commercially, technically, I think the...

So what will this Central Bank do with your solution, they will adopt it, implement it?