Cyviz AS (CYVIZ) Earnings Call Transcript & Summary

Makes it more efficient...

More efficient. We think that we will be able to have more of the margin left on the table because we limit, I mean, all the things that might go wrong in the tender process. So for all the right reasons, it is an important thing for us to continue to drive more frame agreements with large customers into the portfolio. So I mean, the results we are presenting today and the type of indications we are trying to give you for the year is largely centered around our core business. the type of traditional Cyviz business where we are out delighting customers with full turnkey solutions regardless if it's meeting rooms or control room or operation centers or technology centers, areas where I do believe we are the best in the industry. We have spent a lot of time over the last, I would say, 12 months to look at how do we add and bring more products and services to the market and how can we capitalize on the strong good legacy that the company has built over years, giving customers even better products, more services and also help us as a company to improve our competitive advantage while we are moving in a direction where we want to provide more services and SaaS-based offerings to customers. And I'm happy to continue to talk about the development on the platform, so the management and monitoring platform. As we stated after the Q4 -- in the Q4 earnings call, we have 10, 11 global and local and regional partners signing MOUs to take that out in the market. Finishing second quarter, so like May, June, we are turning those MOUs into signed partner agreements. The platform is already now at an MVP. So it's a ready solution available for partners to go out and sell. And we do expect that we will start the commercial type of sales journey with the new platform already just after summer with a subset of key global, local and regional partners. This is the first type of new SaaS-based solution Cyviz as a company is bringing to the market. It's built on the legacy of the management and monitoring platform we have today, which is an on-prem solution. The on-prem solution we have today is a fantastic management and monitoring platform for Cyviz equipment. The new one, which is a software-based platform, is an open platform that would allow customers to manage and monitor everything, all their AV, regardless if it's Cyviz products and solutions or competitive products and solutions or more of the low-end type of product and solutions. They can now monitor absolutely everything. They can do health checks, they can do remote access, they can do remote management across all types of AV equipment, across multiple buildings, multiple countries and multiple regions. So for us, it's a fantastic move in the direction of becoming more focused around technology and platform as a company and enhancing the journey towards a much larger portion of our business connected to software and SaaS and recurring. And the second topic that we have spent some time trying to like crack a code around is the Cyviz core products and technology. Those 3, 4 pieces that actually makes our solution working better than competitive solutions and see if we can package that in a way that enables a partner ecosystem to bring that out to customers in markets and customers where we are not present today. So how do we like expand and build the total addressable market in an easy, efficient and good way for ourselves. And we believe that with the right packaging, the right partners, the right type of training and onboarding on these partners, this is a key area for us to continue to drive, I would say, revenue growth and not at least margin growth. Because these are the products with by far the highest margin components we have also in a complete solution. And that is due to be like rolled out during second half of the year with some partners to test the market, get some feedback, do the right adjustments and then a full-scale type of commercial rollout entering into 2025. So just to give people the right perspective and the facts around what we are doing on new product innovation and new services, this is what is coming.

But it's important to emphasize, it's coming. It's not a material part of the numbers that you're seeing today, and it probably won't be this year either, but it's kind of the strategic development of the company and where we see growth and margin be coming from in the future.

That is a valid point. We are not basing our performance this year regardless of order intake, revenue or EBITDA, largely on any impact on these. Whatever comes on this will come on top. But this is like for 2025 and beyond to really accelerate the recurring revenue, the stickiness with customers and the expansion of Cyviz as a company way more globally through a partner ecosystem through these 2 things than we have ever done before. Okay. Then let's just do a quick look at how we think about outlook. I think we have said a lot with the new products. It's definitely part of the new future for the company. No doubt that the key focus this year and into next year is around profitable growth. And this year, it's still going to be driven by growing our core business, but launching and adding new products and services for 2025 and beyond and of course, continue to manage cost and cash flow. So the focus this year is around profitability through cost optimization. So we have already done a lot, I mean, through second half of last year and into this year on balancing the cost base of people across corporate functions, local functions and regional functions. We will continue to do that. We are definitely looking into how effective we can bring new services and new products out in the marketplace, as we said, to drive revenue and profitability. And we are very comfortable still regarding our medium-term target of an EBITDA around 15% to 20%. And there is still a growing demand for more advanced solutions. And that is a benefit for companies like us because we don't deliver those type of light touch, easy, simple things. We do develop and sell and deliver things that adds value, multipurpose rooms, mission-critical control rooms, technology centers that enable customers to like showcase their stuff in a much better way than they historically have done. And we are investing in that. And we do see both in the order backlog and in our pipeline that the development of demand is continued to increase not just across all the regions. I mean, our Middle East, APAC region, our Europe region or North America region. But we are also now seeing, as you said, a positive uptake across private sector. So we see a positive increase on demand across all verticals.

I think that the -- of this slide, the material change 1, 2 and 3 are basically the same as we said before, but number 2 is kind of more on the positive note in terms of both the geographical and the vertical interest.

And maybe you just want to comment on the third one.

So cash management remains important. That's why we have it as a highlight. We touched upon it in quite a lot of detail on a previous slide. Cash flow in this quarter, healthy. We do think positive free cash flow is within reach for the year based on what we're seeing right now. But we do expect some variations within the year depending on the geographical mix of accounts receivable and the backlog, which we're managing with a tight focus. So yes, I think that's...

Yes. I think just as a final note, I think -- I mean, a lot of people are aware that we have our Cyviz experience centers, which has been very, very important for the company to showcase solutions. I just want to emphasize that the expansion going forward, regardless of whatever market we enter, would only be with partners. We will not do any Cyviz experience centers by ourselves. We will piggyback on Microsoft technology centers, which are fantastic centers delivered by Cyviz, bring customers in, use that to like attract new customers. And for any type of expansion, regardless if there are new products, new solutions in new markets or us as a core will only happen with partners. So it's also important to understand that, that's part of the cost optimization and the drive for increasing our profitability when we are growing our business significantly over the next years. So with that, I think we should open for questions if there are.

Yes, there are. Start with the first one. Your comment about reiterating the revenue growth CAGR of 30% since the IPO has disappeared from this and last quarter's presentations and dot, dot, dot. So it's in terms of the guiding and the medium-term target of 15% to 20% EBITDA and then the CAGR of 30% growth, which is not there anymore.

No. So I think -- yes, and that's, of course, good observed. And it's also, I mean, really? If you look at the trend over the last 3 years, you would see revenue growth CAGR-wise that is higher than 30%. With the type of enhanced focus and strategy that we applied during 2023 and are strengthening now into 2024 around profitability, positive cash -- working cash capital from the operations and development and launching SaaS-based platforms and solutions that will drive higher margin, better profitability, increased reach in the market and building up a much larger portion of recurring business. It will have some sort of impact on how fast we can continue just focusing on growing the top line. With that said, it doesn't mean that we are not having ambitions and internal targets of growing our top line year-over-year. But we are trying to like balance like the steep top line growth that also drives a lot of cost to fuel it with the fact that we are gradually trying to move the company more in the direction for SaaS-based solutions, more recurring, high-margin type of ticket items, to make sure that the overall profitability of the company over the next 2, 3 years increases significantly faster than just the top line on revenue.

Yes. And obviously, the base that we're calculating the growth on is a lot bigger. So having 30% growth on NOK 100 million turnover, which was the case in sort of NOK 200 million turnover in 2019 is a different story than having a 30% increase on NOK 600 million, which is where we're trending now. So it's reflecting that as well, but primarily what you're saying, which kind of takes us to the next question here as well, which is what kind of gross margin do you expect on the SaaS platform sales? I think from our perspective, this is something that we need to guide more upon as we are nearing 2025. Espen just mentioned on the previous slide, these are high attention areas for the company, but it won't materialize financially, at least not with a substantial effect until next year. So in terms of margins, kind of what percentage or what share will be recurring revenue or kind of a recurring base.

I mean your job is to be like pragmatic and political. My job is to like put a little bit more color into this without like saying too much.

I'm the conservative one, yes, true.

Since I'm the -- I mean, the type of realistic optimist. So we have just finalized internally the pricing scheme for the platform. I mean for the platform as such, there will be 2 variants depending on like the customer type of installation and also, of course, pricing on all the type of software and applications that will be incorporated based on customer needs. So we have a good view on what like a yearly type of value by installation, not by customer because a customer might buy multiple type of platforms to run this, but by installation. What I can say is that the margin picture on a platform that is built as a software application or software platform. It's not a physical thing. It's a software thing. You can actually turn it on and off. If you keep development cost to get to a place where we are now where we have a platform ready to be launched, we will have a significantly higher margin by itself, by default than our traditional business that had been between 45% and 48%, 49% year after year. But more precise than that, it's a bit challenging to say because we are building this platform to enable a vast partner ecosystem. And we have built it with an architecture that allows partners to build their own managed service on top and around that platform to make it more attractive for partners to see that they can earn good money, not just by applying and giving customers the best platform to do ABC, but also to build their own business around it to motivate them to do more and go out to a lot more customers, hence, creating a bigger market opportunity for us. So significantly higher average margin than the traditional business without saying more than that.

All right. That was the end of the questions.

Yes. If there are no more questions, we would like to thank everyone that watched and listened in and shared questions and wish everyone a happy National Day tomorrow.

For the Norwegians.

For the Norwegians that are watching and for anyone that is here but not Norwegian, you should still go downtown and see what this type of crazy thing is all about. So happy 17th of May, and thank you for watching and listening and providing questions. And looking forward to see you again when we present our Q2 earnings numbers. Bye-bye.