Infomedia Ltd (BGLOBAL.BO) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. My name is Bart Vogel, I'm the Chairman of Infomedia Ltd. Welcome to Infomedia's 2020 Annual General Meeting. The health and safety of our shareholders and our people is of paramount importance to us. In consideration of the potential health risks posed by the ongoing coronavirus pandemic and any associated restrictions on public gatherings, we've elected to hold this AGM as a virtual event. There are several matters I need to mention with the format of our meeting being different from prior years. Firstly, every effort has been made to ensure the meeting is delivered in a way that allows you, our shareholders, to participate. However, if you experience technical difficulties, which preclude you from attending the meeting live, a recording will be available for you to review after the meeting on the company's website. Secondly, shareholders who were on the register as at 7:00 p.m. on Monday, the 9th of November, 2020, are eligible to vote at this meeting. Third, shareholders can ask questions in this virtual meeting format and we encourage you to do so. [Operator Instructions] Detailed instructions about how to vote and ask questions are set out in the virtual meeting online guide, which was distributed with the notice of meeting. If you have a question already prepared, please submit it now on the platform so that I can answer as many questions as possible when I come to the relevant agenda item. You do not need to wait for the relevant item of business to be able to ask a question. I ask also that you keep your question brief so that as many shareholders as possible have an opportunity to ask a question. Questions sent via the online platform will be moderated to avoid any repetition of questions. If questions are lengthy, we may also need to summarize them in the interest of time. To assist with the smooth running of the meeting, questions submitted via the online platform will be moderated by our company secretary, Mr. Dan Wall, who will read out the name of the shareholder and their question. We will give all shareholders a reasonable opportunity to ask questions. But if it's not possible, then all -- it may be possible that not all questions will be answered today. Shareholders are welcome to follow up with our Head of Investor Relations, Tanya Thomas, with any unresolved questions after the meeting, and I assure you we will address every question. Tanya can be contacted using our dedicated Investor Inquiries page within the Investor Center on our website at www.infomedia.com.au. Let me then declare our meeting open. We have a quorum present and the meeting is declared open. I'd like to start the meeting today by acknowledging the traditional owners of the land from which we are presenting today in Belrose, the Ku-ring-gai people, their elders past, present and emerging. Today is also Remembrance Day. I'd like to acknowledge the men and women who have served in the Australian armed forces, and particularly those who have made the ultimate sacrifice to defend Australia and its allies. In recognition of Remembrance Day, it's my intention that this meeting be concluded prior to 11:00 a.m. However, if the meeting does continue longer than anticipated, we will pause to recognize a 1-minute silence at 11:00 a.m. So for those of you that have been used to attending this meeting, we normally start at 10 a.m. For those who are joining us from Western Australia, I apologize for the early start, but I'm sure you'll appreciate our reasons for the early start. The format of today's meeting will proceed as follow: I will provide an opening address, commenting on the performance of the business during the year. I'll then ask our CEO, Jonathan Rubinsztein, to speak about the company's performance, strategy and outlook. I will then address the meeting -- the items of business in the order in which they appear in the 2020 AGM Notice of Meeting. And for expediency, I will take the notice of meeting as read. As mentioned, there'll be an opportunity to ask questions and make comments about operations or management of the company and any related matter at the appropriate times during the meeting. And I will make sure that we offer you the opportunity during the course of those question times. To use the online and vote on the online platform, please click the Get a Voting Card icon on your screen, then enter your shareholder number or proxy number, complete your details and vote following the on-screen prompts. Let me now introduce my fellow directors who join me here today at our Belrose headquarters. Firstly, Kim Anderson; Anne O’Driscoll; Paul Brandling; Clyde McConaghy; and coming back to the center, our CEO, Jonathan Rubinsztein, and our company secretary, Dan Wall. Also joining us at the meeting today is our CFO, Richard Leon. And Infomedia's external auditor, Deloitte, are also in attendance here at Belrose today. The audit partner, Pooja Patel, is available to answer any relevant questions you may wish to ask later in the meeting, and I thank Pooja and her colleagues for being here in attendance today. I'll now turn to the Chairman's address. On behalf of the Board of Infomedia Ltd, we'd like to express our sincere gratitude to all our shareholders for your support in what has been a year of change, growth, challenge and opportunity. If I reflect on the 2020 financial year, it's been a year of sustained customer engagement and pleasing financial performance in the circumstance. We've continued our investment in the future by building the next generation of our core parts platform and our services technology solution, investing in our data insights platform and completing a successful $83.9 million capital raising. We were pleased to deliver a financial result for the 2020 year that was in line with expectations and also supporting our customers during these challenging months, particularly between March and June of this year. The strategic decisions that we made during the year were intentionally bold, and I have no doubt that they will ensure that Infomedia is well placed to sustain growth into the future. As you'll see, 2020 is the fourth consecutive year of revenue and earnings growth achieved by the current management team and Board. A strong start to the year underpinned a good result despite delayed revenue and opportunity in the second half of the year because of COVID-related restrictions. Infomedia's earnings per share increased by 10% from $0.0569 per share, up from $0.0519 the previous year. Infomedia reported increased revenue from -- to $94.6 million, an increase of 12%. And net profit after tax was $18.6 million, an increase of 15%. Our EBITDA margins also increased during the year from 45% to 49%. Cash EBITDA, which is a key internal metric to identify the cash impact of capitalized development costs in reported earnings, increased by 11% to $21.3 million. We are in a solid financial position. Net current assets are $98 million, including cash and cash equivalents of $104 million. Let me talk a little about capital management. In April and May of 2020, we completed an $84 million capital raising via an institutional placement and a share purchase plan for retail shareholders. A key pillar of Infomedia's response to COVID-19 was to position the business for attack, not only for protection. With the market opportunities before us, we were determined to ensure that we had adequate balance sheet flexibility to manage our development imperative as well as to be able to respond to potential acquisition opportunities. We took proactive steps to ensure that both institutional placement and SPP was structured to balance the best interest of all Infomedia shareholders and the long-term growth of the company. Your Board was very involved in the allocation of shares in the institutional placement. Approximately 98% of Infomedia's nearly 5,000 shareholders were eligible to take up at least their pro rata entitlement. I'd like to thank you all for your support during the capital raise. I will say, however, it's not lost on this Board or on management that all our shareholders would like to see this money productively employed. The additional capital raised by -- raised to fund our future growth remains intact. Our M&A strategy is progressing well. Our focus, however, is to ensure that acquisition targets meet our investment criteria, to enhance our core product offerings, to provide access to new customers or new markets, and of course, any acquisitions would need to be clearly earnings accretive. Infomedia continues to be highly cash generative in our core business, and there is currently no change to our company's stated policy of paying dividends at the lower end of the dividend payout range of between 70% and 80% of NPAT. Let me now focus on how we've positioned for strength beyond COVID-19. In previous years, I've spoken about our efforts to nurture a corporate culture that is diverse, that is high-performing and customer-centric. We've invested significantly in recent years to ensure that our people, processes and systems support the business have -- and make sure that we have the skills, the disposition and integrity to support Infomedia through the various phases of its development. During the year, those skills were tested, and Infomedia's team globally rose to meet the challenge, showing tremendous support to each other along the way and putting our customers first. This was done initially as a trial and turned into an immediate mode of operation. Almost overnight, 300 people around the world worked -- transitioned to working virtually from home. Simultaneously, nearly 60% moved to a 4-day-a-week, except those working to meet the critical deadlines of our Next Gen development project. Our global teams -- our global sales teams in Europe, North America and Asia Pacific worked long days and often into the night to engage customers, to listen to them, to identify their challenges and provide innovative solutions where needed. Our focus on staying connected, increasing communication and collaborating online resulted actually in an increase in productivity across all teams and provided a positive effect culturally, which was reflected in recent engagement surveys we've conducted with our teams. A commitment to customers and accountability underpins our core values that we share across the business, and the events this year have been a testament to the livability of that commitment. On the issue of governance, let me reiterate that Infomedia's Board places high emphasis on personal integrity, mutual respect and is committed to achieving the high standards of professional conduct across all of Infomedia's operations that you, our shareholders, would expect. More detail of Infomedia's corporate governance framework, oversight policies and the Board and management approach to managing risk can be found on the Corporate Governance section of the Infomedia website. I'd like to then talk about building a global leadership position in our business. The Board remains active in its oversight of the company, the strategic initiatives and stakeholder engagement. The confidence of the Board and management to grow Infomedia's business by leveraging our existing core assets to a large global customer base through innovation, investment and partnership has actually firmed during this year of volatility. We're confident that we are well placed to emerge from the challenges of 2020 in a much stronger position. Our strategic objectives and direction to be the leading software provider to the global automotive aftersales market are clear. The disruptive trends facing our industry and changes in new car sales are resulting in an increased focus on leveraging data-centric technology in automotive aftersales. There's an increase in our sweet spot to the industry. We believe that Infomedia is well positioned to capitalize on these trends by leveraging our core parts, service and data solutions, which Jonathan will cover in his address. As we've previously signaled, COVID-19-related restrictions will result in softer revenue growth in the first half of this financial year. However, recent wins in Europe, including the announcement we made of our new success with Ford in Europe last week and other really interesting deals in Asia Pacific and Americas are expected to deliver a stronger second half in the second part of the 2021 financial year. So our confidence stems from our knowledge that Infomedia has won a few global software providers in both parts and service and holds a distinctive and enviable position to leverage information and transaction data that's often tracked in disparate operational automotive manufacturing and dealership systems. This is our unique proposition. Let me close now by saying that on behalf of Board and management, thank you to our customers, to our shareholders, our employees and our partners for your loyalty, your commitment, your trust and support during this most unusual year. I'd like to acknowledge the extraordinary efforts of Infomedia's management team under the leadership of Infomedia's CEO, Jonathan Rubinsztein, for their ability to innovate; develop; deliver; engage; and importantly, to protect and attack during this year. I'd also like to thank our nonexecutive directors, Paul, Anne, Kim and Clyde, for their support during this year. But most importantly, let me say a big thank you to our Director, Clyde McConaghy in particular, who leaves after 7 years with the Board. Thank you, Clyde, for your very significant contribution to Infomedia. You've really assisted us in the transition to the team that is in leadership role today, and we value your contribution. Thank you. Let me now hand over to Jonathan Rubinsztein for the CEO's address.

Thank you, Bart. Good morning, everyone. This morning, I'd like to start by spending just a couple of minutes talking about who we are, the significance of the 2020 financial year and why we are excited about the opportunities ahead. I'll briefly review a number of achievements we have made during the year and then move on to discussing the strategic initiatives which underpin Infomedia's future growth. Infomedia is one of few global software providers to the automotive aftersales market. One of our core values is to navigate global and steer local with offices in Sydney, Melbourne, Cambridge and Detroit. Over the last few years, we have been investing to capitalize on the significant change in the auto industry with the recent development of our next-generation, data-driven technology. Our market-leading software solutions provide timely, efficient and cost savings to our automaker and franchise dealer customers. Our modern Next Gen platform of integrated parts, service and data solutions allow Infomedia to drive a much stronger customer proposition and access a broader addressable market. I'm very excited with this as it is a significant shift for Infomedia, which I will explain later in more detail. The 2020 financial year will be remembered in Infomedia's history as a time of sustained performance and continued investment in the future. We built the Next Gen platform, invested in data solutions and completed a successful $83.9 million capital raise to fast track growth. We also completed the Nissan global rollout, moved our team of 300 permanent employees to working from home and supported them and our customers to address their specific needs during an unprecedented and uncertain period. Since August, business activity has picked up, resulting in the completion of several wins in APAC and EMEA, including the win with Ford Europe that we announced last year -- last week. It is strategically important as it is the first win on our Next Gen platform and demonstrates the sales potential of this new platform. Sales across Americas also improved under the direction of our new regional head and reinvigorated sales team. I am very pleased to announce that we have also recently signed several leverage sales partnership agreements with peer automotive software companies in the region. So what does that mean? What does a leverage sales partner mean? This is really when we embed our software and data solutions within our partners' software. So every time they sell a new customer, we become part of their solution. The concept really is like powered by Infomedia or Intel Inside. The first of these partnerships is with DealerBuilt, a modern, highly customizable customer experience dealer management system in the United States. Under the agreement, the DealerBuilt DMS will be powered by Infomedia's service menus and data solutions, allowing them to compete head-to-head with some of the larger DMS providers in that market. We have also reached similar deals to provide service menus and data solutions to MyCarma, a dealer-based customer communication and payments platform; and UpdatePromise, a fixed-operations consumer experience platform for collision repair centers and dealerships. Infomedia purposely operates with a small and agile sales team covering a large area, and this opportunity really improves our reach across Canada, Mexico and the United States. These are true partners, and we will leverage each other's sales force to sell our combined solutions. Early stage indications are very promising. Bart spoke previously about the protect and attack measures we put in place in response to the global pandemic, and this is also explained in some detail in the annual report. I would like to acknowledge the leaders and individuals across Infomedia's business who contributed in so many ways to establishing a global virtual working environment that was efficient, responsive, engaging and supportive to our employees and our customers. Despite the change and the uncertainty of this year, we have continued to deliver on our strategy. And subject to restrictions easing, we expect growth in calendar 2021 to reemerge at a faster pace. The initiatives that we put in place to capitalize on emerging trends included: number one, how do we strengthen the core? And we'll spend a lot of time talking today about Next Gen, but we've built Next Gen, and this will all be delivered and rolled out by the end of this calendar year. Number two, expanding the call. So through the acquisition of Nidasu and leveraging our rich data assets and insights, we believe this will become an increasingly important part of Infomedia's business going forward. We have also further invested in our global account strategy, which we believe was a significant contribution to the Ford Next Gen win in Europe. And then number three, acquisition. We are focused on acquiring assets that give access to new functionality, new customers or new geographies. And Bart said earlier, we hope to say more about this in the new year. Our aim is to be the leading software provider to the global automotive aftersales market. Our strategic initiatives are directly aligned to the objective of our customers who are focused on protecting and growing aftersales and retaining customers to their brands through excellent service. The disruptive technology trends facing our industry continue, including slower new car sales. This means automakers and franchise dealers need to improve productivity, and the key enabler to this is technology. We have continued to invest to develop a unique customer experience. Our focus is on breaking down the traditional silos of separate parts and service fixed operations, capturing and mining data to help our customers make sense of their data and supporting a global brand experience for our customers. Whether it is innovation, acquisition or partnership, we are pursuing multiple growth opportunities, which are supported by the industry tailwinds. We feel we have completely reimagined aftersales. Of course, we might be slightly biased. With the development of an integrated platform designed using a customer-centric design philosophy, I'm so proud of what the team has achieved over the last 2 years. We have currently rolled out the Next Gen platform to around 2/3 of our customer base, and the feedback has been excellent. Our customers are telling us that we have jumped ahead of the competition by embedding service data into our parts software. Our provision of what we believe is the world's best global search functionality within a parts catalog has transformed a siloed technical reference tool into an integrated parts selling platform. We have also been investing in data solutions. As one of few global providers, we are in an enviable position to leverage information and transaction data from multiple operational, manufacturer, dealer and third-party systems to provide insight that is valuable to our customers. We believe connecting data silos remains a significant opportunity that will deliver better auto customer experiences and really help redefine success metrics and grow aftersales profits. The development of Next Gen opens new opportunities. Before, Infomedia's Microcat EPC, Superservice menus and Triage software was delivered as separate point solutions. Now with Next Gen, our move to an integrated platform allows Infomedia to deliver a modern, comprehensive suite of offerings across multiple customer segments. I've talked a lot about how we have grown our capability, but I'm often asked about the size and the potential of the market we play in. This year, we've spent a lot of time refining and testing our strategy around where to play and how to win. This chart shows the total global auto dealer software market broken down by type of customer or channel. Here, we aim to delve a little deeper into a TAM slide we have previously shared with the market. That slide is available for reference in the appendix to this presentation available on the ASX or our website. As we have worked collaboratively with our customers, we have identified a significant opportunity to leverage our integrated solution across the broader ecosystem. With the capabilities we have today, we can use our core products and data to expand the aftersales reach of our OE customers more efficiently and consistently into segments such as collision, mechanical and e-commerce. Today, we're going to explore the second and third segments of the TAM diagram on the left-hand side. The first circle, Infomedia's Megatron logo references our FY '20 revenue. The second larger blue circle references the $2 billion to $3 billion global dealer aftersales parts and service market. The third larger still aqua circle represents a global auto dealer software market. The outer gray circles represent a much broader and significant auto market, which we aren't really playing in. This would be things like CAD and a whole lot of other engineering type applications. The light blue sections on the chart to the right represent the estimate of our SAM today, which is a serviceable addressable market within each segment. In summary, we're playing in a huge market of approximately $12.9 billion. Historically, our focus has been in the franchise dealer market, where we estimate our SAM is approximately USD 1.2 billion. Driven by the design request from our customers who aim to further penetrate these markets, we believe our innovative solutions support them to compete for aftersales revenue in these segments typically against the aftermarket. Combining the power of a modern integrated platform with our existing capabilities and global customer relationships, these allow us to participate in a larger addressable market, shown as the extension of the SAM in light blue -- or aqua. Most importantly, the stronger our customer proposition, the more likely we are to win. Hence, our key focus has been how do we create the strongest customer proposition to win? We have a clear strategic plan to be the leading player in the global automotive aftersales software. Over the last 5 years, we have delivered a compound annual growth rate of 9.4%. Looking forward, our focus on customers and 4 key differentiators, including our strong global position; the transformative Next Gen platform that we have built; our fantastic, talented team; and our M&A capacity; will underpin our future growth. We believe these are our strengths, and our focus in these areas will allow us to grow strongly over the medium term. Our aspirational target is to double our revenue in the next 5 years to AUD 200 million. Above all, we are committed to providing solutions that drive success for our customers and building a great place to work. Thank you.

Thank you, Jonathan. I now move to the formal business of the meeting. I'll briefly introduce every resolution. The formal resolution wording, together with proxy positions, will be displayed on your screen. All items of business will be determined by poll. Votes will be counted immediately after the meeting, and the results will be posted on the ASX as soon as practicable, exactly as it would be in a physical meeting. As stated in the notice of meeting, I intend to vote all open proxies held by me as Chairman in favor of all resolutions. The voting positions, which will be displayed behind me for each resolution, will include the proxy votes that I hold. There will be an opportunity for comment or question before each vote is taken. Again, if you have a question, you do not need to wait for that item of business. You can submit it now. I declare the poll open. The first item of business is consideration of the company's FY '20 financial statements and report. The financial report, the director's report and auditor's report for the year ended 30th of June 2020 have been distributed to members. The company's 2020 annual report is available for download from the company's website. There is no formal vote required on this item of business, but I now ask and invite shareholders to ask questions or make comments as to either the financial statements and reports, the operation and management of the company, the conduct of the FY '20 audit, the audit report, the accounting policies of the company or of the independence of the auditor. And our CFO, Richard Leon, is available to answer those questions as well as Ms. Pooja Patel of Deloitte, who is available to answer questions relating to the audit. Dan, do we have any questions on this item?

Chairman, we have no questions on this item.

Thank you. There are no questions on this item. That concludes our consideration of the company's audited financial report. Let me then move to resolution 1, which is the adoption of the remuneration report. We'll just wait for that to be displayed on screen, which is now up. Please note that this resolution is advisory only and does not bind the directors or the company. I do, however, note for the record that if 25% or more of the votes are against the resolution, this will constitute what is called a first strike. Voting exclusions apply to resolution 1 as set out in the notice of meeting. The Board unanimously recommends that shareholders vote in favor of this resolution. And the formal resolution, together with voting positions, are now displayed on your screen. As Chairman, I hold 0.39% of the voted capital by proxy, which I intend to vote in favor of the resolution. Dan, do we have any questions on this item?

Chairman, no questions on this matter.

Thank you. No questions on this matter. There being no further questions, please cast your vote on this resolution if you have not already done so. Let's move then to resolution 2. The second resolution is for the election of Kim Anderson as Nonexecutive Director to the Board of Infomedia Ltd. Kim was appointed to the Board on 15th of June, 2020, as an additional member. She retires in accordance with the company's constitution and the ASX listing rules and, being eligible, offers herself for election. Kim has more than 30 years' experience as a CEO and a senior executive in a range of media companies, including Southern Star Entertainment; PBL; Ninemsn; and Reading Room Inc., of which she was the CEO and Founder. Ms. Anderson holds a Bachelor of Arts from the University of Sydney and a Graduate Diploma in Library Information Science from UTS. She is currently a Nonexecutive Director of Carsales Limited, WPP AUNZ, Marley Spoon and the Sax Institute. Prior to Kim's appointment, the Board undertook appropriate checks into her background, character and experience as well as the appropriate criminal record and bankruptcy searches required of us. No concerns were identified from those checks, thankfully. And so with that, Kim, let me hand over to you for some comments regarding your candidacy.

Thanks, Bart, and thank you to all our shareholders and to my fellow Board Directors for your support. For those of you who don't know me, as Bart outlined, my background has been in traditional media but most particularly in digital media. And I have also a long history of governance, having joined my first private board in the late 1990s and the Senate of Sydney University in 2004. My preference is to join boards in industries that are either disrupting or being disrupted. And as you can see from my brief bio, I'm currently on a number of publicly listed company boards, including Carsales since 2010, just after it floated. I have seen Carsales grow from a start-up to become a $4.5 billion company with many #1 positions throughout the world. And I think Infomedia aspires to and can do something similar. I'm also on the Board of WPP AUNZ, itself being disrupted and undergoing major transformation. And I'm on the board of Marley Spoon, a meal kit business disrupting the way we buy and consume food. I'm honored to join the Board of Infomedia and to have the opportunity to work with my highly respected fellow directors as well as a highly talented and dedicated leadership team. And I look forward to serving you, our shareholders. Thank you, again, for your support, and I very much look forward to working with you.

Thank you, Kim. The Board, with Kim abstaining, has considered her candidacy, both in respect of her individual merits, background and experience as well as in relation to overall Board composition, and we recommend strongly that you vote in favor of her election. The formal resolution, together with voting positions, are displayed on your screen. As Chairman, I hold 0.44% of voted capital by proxy, which I intend to vote in favor of the resolution, as previously indicated. Dan, do we have any questions at this time?

No questions on this matter.

Thank you, Kim, and congratulations on your appointment to the Board. The third resolution then is for the reelection of Anne O’Driscoll as a nonexecutive director. Anne was formally appointed to the Board as a nonexecutive director on the 15th of December 2014 and was last elected by members at the 2017 AGM. She retires in accordance with the company constitution and the ASX listing rules and, being eligible, offers herself for reelection. Anne has over 35 years of business experience, having qualified as a chartered accountant in Ireland in 1984. She was CFO of Genworth Australia from 2009 to 2012 and spent over 13 years with the Insurance Australia Group in a range of roles, following her chartered accounting experience at PwC and Deloitte. Anne also serves as Chairman of FINEOS Corporation plc and as a Nonexecutive Director of Steadfast Group Ltd., commonwealth Insurance Ltd. and MDA National Insurance Pty Ltd. I'd like to now invite Anne to say a few words regarding her candidacy.

Thank you, Bart. In a month's time, I will be marking 6 years on the Infomedia Board. It's been a really interesting time and continues to be very engaging, given our current position, embarking our next -- on our next phase of supporting our customers with our new platform and the prospect of additional services through inorganic growth as well. That brings me to how I can represent you, the shareholders, as we deliver on our strategy over the coming period and seek to generate substantial shareholder value in the process. In serving on the Board, I seek to bring to bear what I've learnt over the years, particularly from the perspectives of audit, finance, M&A, risk strategy and governance. Now having been on the Board for a while, one turns to thinking whether I'm still able to bring value, objective prospectus and deliver on that balance of supporting and challenging management. I have reflected on this as we approach the preparations for the AGM, and on reflection, I believe I can continue to do so and thus represent you, the shareholders. I look forward to continuing to work alongside my Board colleagues, and indeed, my newer colleague, Kim, who's been adding such value in such a short time. So I look forward to continuing to work alongside the Board and, of course, our fine management team. Thank you to those shareholders who voted in favor of my election.

Thank you, Anne. And as Chair of the Board, let me reflect that I'm delighted by the leadership that Anne has shown in her role as Chair of the Audit Committee and, in particular, her working relationship with Richard Leon, our CFO. So with that, the Board, with Anne abstaining, considers that Anne remains independent. And we've considered Anne's candidacy both in respect of her individual merits, background and experience and the overall Board composition, and we recommend strongly that you vote in favor of her reelection. The formal resolution, together with voting positions, are displayed on your screen. As Chairman, I hold 0.44% of voted capital by proxy, which I intend to vote in favor of this resolution. Dan, do we have any questions on this item?