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

Hello, everyone, and thank you for joining the Infomedia Half Year Results Briefing. We will begin with a presentation by the Infomedia management team followed by Q&A. [Operator Instructions] Now I will hand across to the Infomedia CEO, Jens Monsees. Jens, over to you.

Thank you, Kiara. Good morning, everyone, and welcome to our first half '25 results presentation. I am Jens Monsees, the CEO and Managing Director of Infomedia. Firstly, I would like to acknowledge the traditional owners of the land on which we meet today, the Gadigal people of the Eora Nation. We pay our respect to the Elders past, present and emerging and extend this acknowledgment and respect to the First People in all countries in which we operate. Joining me on the call today is Chantell Revie, our CFO. Chantell will take you through the numbers and the financials after I spoke. You can follow along on the slides for the presentation, which are released earlier on the ASX I will refer to the slide numbers as we move through the presentation. On Page 2, please note our legal disclaimer and then we move directly on Slide #3. Here, you see the agenda of today's call. I will share the highlights and the business update before Chantell will guide you through the financials. I will then close off by talking you through our outlook. For those who are not familiar with our company, the glossary provides definitions of many of the terms used in the presentation and the appendix contains a good overview on further detail on Infomedia. We welcome your questions after the presentation. Turning to Slide #5, our overview for this first half year 2025. In addition to the existing news on our AI acquisition from last Friday, I'm pleased to report that even with the previously notified SimplePart churn of a large customer with annual revenue impact of around $4 million, we were able to compensate of these losses and report a growth for the first half of 2% total revenue compared to previous period. As guided at the AGM, we kept our margins stable and exit ARR and ARC both grew at the same speed, in line with the plan of our strengthening phase. Free cash flow showed a strong development due to the improvement in working capital and the capital management. We have declared fully franked dividend of $0.022 per share, which is unchanged from last year. As you will have seen from our announcement this morning, we intend to do a buyback up to 5% of the issued share capital over the next 12 months. On Slide 6, I would like to give some background on our first half results. Firstly, both our big core solution groups, Microcat and Superservice, are growing in line with the trend over the last years. In the Americas though, we are expecting stronger growth, which was delayed by the fact that DMS integration is paused due to a cyber incident at one of our partners. Secondly, we have the SimplePart churn event of a client with annual revenues of approximately $4 million. Thirdly, as we have communicated earlier, we have started to rebuild the tech stack of our Infodrive CX solution. The target is to make the product globally scalable and easier to roll out to new clients and customers. This means that our Infodrive CX took a temporary pause in its growth story. We see that the pipeline is increasing, and we are confident that the solution group will return to strong growth once the rebuild is done. As previously announced, our new Head of Americas -- Head of EMEA, Dirk-Marko Adams, started with us on December 1. Dirk-Marko is already having a positive impact on the business. He is restructuring the sales team and gaining momentum. We said goodbye to both founders of SimplePart. They have now left the business, and we are pleased to announce that we have appointed Brent Green as our new Head of the Americas. Brent is a seasoned executive with 25 years of relevant automotive sales experience, driving revenues for startups as well as spending 20 years at Cox Automotive. Brent will commence with us in the near future. We took the opportunity to change the reporting line of the e-commerce product and tech team. They are now reporting directly into our Global Chief Technology Officer and our Chief Product Officer, freeing up the new head of Americas to focus his entire energy on our clients to drive sales and retention in our biggest region. We are confident that this appointment as well as the implementation of the hub-and-spoke model and the rollout of the customer success team will accelerate the sales performance of this region going forward. As predicted in the full year 2024 results presentation, the automotive industry has experienced significant change. We see entry of Chinese OEMs, the plateauing of the EV segment, and the current political discussion on tariffs and tax. This is likely to have a short-term effect on our ability to sign new contracts, as the OEMs are working out their appropriate response to the changing landscape. The mid- and long-term effects will be very positive, and we are confident that our products are a cost-effective way to add value to our customers. As customer budgets are tightening, we might see less focus on in-house projects from OEMs in the future. On Page #7, you see the initiatives we are driving in the strengthening phase. I showed that picture at our full year results, detailing our priorities across the 4 Ps of people, product, processes and performance in the organic business. I am happy to report that we have achieved a lot, and I would like to first touch upon the complete initiatives. Over the last 6 months, we have been able to attract high-quality new leadership in both EMEA and Americas region. We observe the energy that Dirk-Marko brings into the EMEA team, and we anticipate we will see a similar positive change in the Americas with Brent, joining us in the very near future as Head of America. We also bolstered our R&D capacity, whilst maintaining margins by continuing to offshore R&D resources where appropriate. We have progressed the joint data lending between SimplePart and Microcat, and this is delivering efficiencies, allowing us to invest in other product solutions without increasing our R&D costs. Moving to the areas where we still have to work on. The rebuild of Infodrive CX is in progress, and we are making sure that the rewriting of the tech stack is globally scalable. Pleasingly, we can see that the pipeline is increasing, and we are confident that the sales performance will rapidly return once the rebuild is finished. Next, I would like to point out the importance of the ongoing global rollout of our customer success program. Customer retention is a big focus area, especially for the Americas and for the SimplePart clients. The upgrade and the strengthening of our global enterprise systems is progressing well. We are continuing our work to expand our existing products into new market segments and to accelerate our global expansion. And that's a good transition to the next slide. On Slide #8, I call out my personal highlight. On Friday last week, we shared the news that we are acquiring 50% of Intellegam, a European-based generative AI start-up. I will now go through the entire strategy -- I will not go through the entire strategy rationale again, but I would like to point out some of the exciting points for you: firstly, to offer Intellegam's existing AI enhanced solution to all Infomedia customers; secondly, the great product fit with Intellegam's AI solution being highly complementary to Infomedia's current product suite and the tech stack is easy to implement. This is a main requirement to leverage our existing valuable data assets. Thirdly, the new market opportunity is significant. AI will enable us to increase our ecosystem. And at the same time, it will speed up our product development time frames. Finally, the integration of Intellegam is starting from day 1, and the founders are highly incentivized to develop and grow the overall business over the next 5 years. I will now hand over to you, Chantell. Please take us through the financials. Thank you, and over to you.

Thank you, Jens, and good morning, everyone. Starting at Slide 10. You can see that the recurring revenue increased 3% and one-off revenue has decreased. This is due to lower training revenue on Superservice, whilst new customers have been onboarded. Overall, this led to a total revenue increase of 2%. Moving on to the costs. We continued our disciplined approach, and costs only grew 1%. This was as a result of savings in the open head of EMEA role for the first 5 months, reduced head count in SimplePart after finishing the earnout and being able to control the cost base, and savings in data management head count due to the joint data landing of SimplePart and Microcat. Cash EBITDA grew by 7%, and margins remained stable at 23% for the half. Slide 11 depicts all of our profit measures. In the half, capitalization of development costs remained at 14% of revenue. This contributed to the underlying EBITDA growth of 5%. Amortization, excluding inquired intangible assets, continued to increase and grew 12% in the half. Share-based payments increased as a result of the FY '25 long-term incentive plan expense being recognized. This amounts to approximately $1 million in the first half, and there were no business restructuring costs incurred in the half. Tax increased and moved to an effective tax rate of 27%, up from 23%. This has been driven by the tax rate increasing in the U.K. and continued offshoring of our development resources, which decreases our available R&D tax credits in Australia. All of this has led to a growth in NPATA of 11%. After taking into account all of the M&A expenses incurred in the half and no earnout for SimplePart in the half, reported NPAT grew 63% and earnings per share grew 62%. On to Slide 12. Infomedia has a robust balance sheet with $78 million in cash and 0 debt. We continue to prudently allocate capital between organic investment and strategic growth opportunities, which include M&A to ensure sustainable returns to shareholders. The large decrease in employee benefits in the period is due to the final payout of the SimplePart earnout being made. Moving on to Slide 13. You see the cash movement for the year. Underlying free cash flow of $17.2 million increased 62% on FY '24. The strong growth in cash in the half is partly as a result of improved cash flow management practices and partly due to delay in renewal of a royalty contract. This resulted in royalty accruals that were not paid by the end of December. Free cash flow increased 57% after taking into account the earnout payment made in September with the final SimplePart earnout. The weakening Australian dollar against the euro and American dollar resulted in a $2.4 million increase to the closing cash balance of $78 million. Turning to Slide 14. This shows the breakdown of our performance across our 3 regions. APAC continues to be our strongest region, growing revenues 9% half-on-half, mostly driven by new Superservice contracts. Along with disciplined cost management, cash EBITDA in the region grew 11%. Despite an open EMEA head count for the majority of the half, EMEA revenue grew 3% in local currency and 2% in AUD from the prior year, driven by 1 new SimplePart customer in the region and some CPI increases on contracts that were renewed. Underlying cash EBITDA in the region grew 4%. America experienced a large churn event in the half of a SimplePart OEM customer, and this resulted in the region's revenue declining 2% in local currency and 4% in AUD in the half. This cash EBITDA declined 4% in the half for America. Moving to Slide 15. Following repeated requests for some churn metrics, we've prepared the following retention analysis. It shows annual recurring revenue from each discrete customer over a 2.5-year period from June '22 to December '24, excluding SimplePart in constant currency. Unfortunately, we do not have this amount of detail to include SimplePart for the entirety of this period displayed. Revenues from existing customers increased by 12.8% over the entire period. This means our average annual net revenue retention is 105%. During the same period, 93.6% of existing revenue is protected, meaning that there was an annual average churn of 2.5%, and new revenue added during this time was AUD 10 million, resulting in average annual growth in new revenue of 3.9%. On to Slide 16. This slide shows the annual recurring revenue and annual recurring costs starting from June '21. The gray area is the period before the new strategy was implemented. The first phase of our strategy was change. where we opened the space between ARR and ARC, creating positive operating leverage and increasing margins. Since the beginning of the strengthen phase, the jaws have continued to widen. In the current period, margins were stable with the 1% increase in both ARR and ARC, delivering as foreshadowed equal growth in ARR and ARC. I'll now hand back to Jens. Thank you.

Thank you very much, Chantell. I'm always impressed by the insights you provide and the strong cash management we have achieved this year. On Slide 18, you probably by now recognize our long-term strategy with some additional elements on the road map ahead. It details exactly how far we are in our transformation journey. As I mentioned, we have already delivered the following elements of the strengthen phase, launched Microcat Pro and therefore, brought it back to growth; accelerated the Superservice solution group revenues; introduced Biz-Dev-Ops and providing flexibility of deploying resources across the solution group; and stopped customization work and focused on recurring revenue, achieving 99% of total; established and integrated -- established an integrated ecosystem where our different solution groups are able to exchange data, enterprise data platform as we call it. We started to improve our enterprise systems, and this will be continued into FY '26. Looking at FY '26. As pointed out in the call-out box, we are finalizing the transformation of Infomedia in preparation for the scale phase. To enable the scale phase, the 3 main priorities for us are: first, strengthen regional sales capability and performance in EMEA and Americas with our newly appointed regional sales leaders; second, continue to rebuild the Infodrive CX tech stack and make it globally scalable; and third, enable the business with AI capabilities acquired with Intellegam. On Slide 19, I would like to discuss our way forward. Firstly, we are currently busy setting the business up to enter scale phase to ensure long-term growth and profitability. We should keep in mind that the automotive industry is in disruption, which creates both opportunities and challenges for Infomedia. There are 3 long-term trends going on in the industry that I would like to highlight here. First, the ongoing OEM consolidation. The news about the potential Honda and Nissan merger is changing every day. We think this creates significant opportunities for Infomedia as we offer a cost-effective and superior solution compared to current in-house solutions in the parts and service space. We are very confident to assist OEMs in saving time and money and providing superior service to their dealerships and their end customers. Secondly, we see a consolidation from single-branded dealerships to multi-brand dealer groups. This is an opportunity for us, given our strong relationship with most of the OEMs on our global market-leading product offerings. Thirdly, we are seeing consolidation of software providers towards bigger and more integrated ecosystems. This creates a one-stop shop opportunity for global operating OEMs with Infomedia. We believe we have an advantage compared to the single-pointed local solution with the most complete and integrated product offering in the market. The recent acquisition of Intellegam further enhances this. We are in a pole position in terms of global capabilities and the speed to develop and implement our solutions. Automation and AI will enable us to further shorten lead times and enhance our competitive advantage. Finally, we are continuing to leverage our data assets by investing in our new solution group, Infodrive Analytics. By expanding on the existing and creating new alliances with third parties in the ecosystem like insurers or fleet providers, we are paving the road for global expansion. On Slide 20, you see the positive impact that we expect from Intellegam in 3 areas. The first pillar represents the immediate cross-selling opportunities from selling Intellegam's existing solutions to the Infomedia's 50-plus OEM client portfolio. The second pillar refers to the opportunity to enhance Infomedia's existing products with Intellegam's AI solutions, in this way, increasing the value generated by Infomedia's existing data assets. The work to integrate fully Intellegam solutions into Infomedia's existing products starts on day 1. The third pillar is what excites us the most and shows that Infomedia and Intellegam will jointly develop new products with integrated AI features. In other words, Intellegam provides immediate cross-sell opportunities, the opportunity to enhance Infomedia's existing products and longer-term opportunities to develop new AI-led products together. On Page 21, we are providing an overview of the existing 6 Infomedia product groups: Microcat, Superservice, Infodrive CX, Data and Analytics and as well SimplePart. The orange box are indicating where and how we will integrate the powerful AI solution from Intellegam into our ecosystem. The horizontal red box labeled AI enablement indicates the benefits we can generate from applying Intellegam's existing AI technologies and tools to our current portfolio. In this way, we achieve both new functionality and reduced implementation time and cost to meet changing customer needs. The vertical red box to the left, labeled AI solution represents the opportunity to develop new AI-based solutions that will enable us to target new market segments and create new revenue streams. To round off the presentation today on Slide 22, I would like to end with the following key messages. Firstly, we are executing our successful strategy and focusing on our operational initiatives. With actions taken to improve sales productivity in EMEA and in Americas, the rebuild of the tech stack of Infodrive CX and the acquisition of Intellegam, we are setting the business up for profitable growth in the future. Secondly, we actively manage our capital to grow the business and to maximize shareholder returns, including regularly dividends. Even after the recent acquisition and today's announced share buyback program, our balance sheet remains in a very strong position. We have a sizable cash balance that will allow us to take advantage of future opportunities, both organic and inorganically. Finally, we confirm the revenue guidance of $142 million to $149 million for the full year and stable margins. I would like to welcome the Intellegam team to Infomedia and thank the entire Infomedia team across the different regions for your great contribution for this year. I also would like to thank our clients across the globe for their business and last but not least, to you, our shareholders, for your ongoing support. Thank you very much for your attention today. I now hand back to the operator to open question. Kiara, over to you.

[Operator Instructions] Our first question comes from [ Jackson ] who asks, how do you see the U.S. tariffs impacting Infomedia's business. Higher prices will lead to lower volumes of new car sales. One, is there any downside risk to existing revenues? Two, understand that dealers will shift focus to services restored profitability and cost efficiencies, but on the other hand, the lower sales translate to less willingness to invest in software IT budgets decline.

Yes, I would say that the opposite is the case. So the dealerships, especially when new car sales is low and difficult, are turning to a very profitable business, which is called after sales. Parts, services, repairs, and that's where we are playing in. And therefore, from our point of view, as the global car park, the units in operations are actually aging now from 12 years to 12.5 years in average. It brings more opportunity for us to sell our aftersales solutions, first. Secondly, we see that the strive from dealerships to go more digital, more automated and more efficient and that's where our solutions are kicking in. And thirdly, it's very interesting that, currently, the dealerships but also the OEMs are trying to understand their inventory and manage the tariffs and the tax in the best way they can. And they come to us with many questions on analytics, on insights. What is the uptake? What is the stock we need? What is the storage we have to bring into the country? And therefore, I see this as a great opportunity for Infomedia to share insights and to drive our data into the dealerships.

Our next question comes from [ Tim ] who asks, apologies if I missed it, but can you please give us an update on the DMS integrations in the U.S., please? How important are these to accelerate growth in the U.S.?

Yes, the full value, [ Tim ], of our products, especially the solution group Superservice is brought in with a bidirectional integration. As you might know and remember, we had a data breach, not from us, but from one of our partners. And therefore, the integration, the bidirectional integration that we had already established is now paused until they have a more safe and secure gateway to their data. And therefore, we are a bit dependent on our partner when they open the new API and when they are ready with their development, but we obviously keep you posted on that one.

Our next question comes from [ Michael ] who asks, is the scale phase still set for the beginning of FY '26 onwards? Or has strengthen been pushed out, please?

So it was never set for the first day of FY '26. Strengthen phase is continued to be finalized in FY '26. And it's always funny when I talk to investors, the interpretation that you run a business and then from 1 day to the other, it looks different because you call it a different phase. That's not the case. The phases are fading in and out. We saw that -- the same way in the change phase towards the strengthen phase and now we are still in strengthen phase, and we'll continue to deliver on our strategy into FY '26.

Our next question comes from [ Chris ] who asks, Chantell mentioned a new SimplePart customer. Can you say who that is and what region?

Yes. [ Chris ], it's in the EMEA region. It's our first SimplePart customer to revenue in the EMEA region in the half. I don't think we've announced who the name of the customer is, and I don't plan on it.

Our next question comes from [ Tim ] who asks, can you please talk to the pipeline of opportunities within Infodrive?

Well, we talked about the big contract that we won with a company or an OEM called Isuzu, Isuzu trucks, this is a new revenue stream because it is in the space of light vehicles, and you might know that we see current home delivery and e-commerce growth. Obviously, there are more units in operation. And the light vehicles, different to private-owned cars, if they are in 1 day in a repair or in a service, they will lose money. And it is very important that these cars are -- or these trucks are back on the road the next day. And therefore, the opportunity to support the OEM by making service and parts quickly efficient and effective, that is what we are currently building on. We obviously need to be careful that we don't have to build twice on our existing and on our new tech stack, but we are confident that we can deliver that big project in the second half of our FY '25 at the end. And for me, it's exciting because there are obviously other commercial vehicle providers that are needing similar solutions on global scale. So it's a big heavy undertaking, but then every other customer that comes on to this new tech stack will be pleased that we can implement them quite fast.

[Operator Instructions] Our next question comes from [ Tim ] who asks, cash EBITDA margins of 0.9% in the first half, do you expect this to hold in the second half? Or is cost investment profile a bit stronger, which might offset this gain in the second half, please?

Yes, [ Tim ]. So we're not managing margin from month to month. We're managing margin for the year. So in answer to your question, yes, versus first half of '24, the margin was slightly up for the first half of '25. But it isn't that much increased from the exit rate of the full year of FY '24, and we don't expect to gain margin in the second half of '25 either. So there is some investment that has to happen in the half to deliver all the pipeline you're just talking about.

Yes. And it's not our strategy to manage margins every day. It is our strategy to manage the strengthen phase and execute on it, and we are well on track there. So there's too much noise in the month-to-month numbers to focus on that one. But I'm pleased that we are right on track on our strengthen phase.

The next question comes from [ Chris ]. Jens just spoke about the potential merger for Nissan and Mitsubishi. Can you please say what EPC SimplePart penetration you already have with each OE at present?

So I talked about a potential merger between Honda and Nissan, not Mitsubishi. But Chris is right, Mitsubishi holds from what I know around 20% to 25% stake in Nissan. We are not surprised, we will see further consolidation on all these 3 areas. On the OEM side, Stellantis is another good example where big brands and OEMs coming together. We see the consolidation of the dealerships, as I talked about, which coming from single brand to multibrand, which is an opportunity because we hold a lot of data for the multi-brand dealerships and finally, also the consolidation across the vendor space. That's why we have an integrated ecosystem approach. The question of how the OEMs are managing the current, I would call it, crisis and the different tariffs and tax that are changing every day from my point of view is an opportunity because they need even more intelligent systems from Infomedia to manage their inventory and their stocks.

Our next question comes from [ Sinclair ] who asks, generating the low end of the FY '25 guidance range implies second half '25 revenue equals first half '25 despite a greater drag from SimplePart customer churn. Can you outline the building blocks, which will bridge this gap?

Yes. Thank you for the question. So we have, as previously mentioned, some price increases on contract renewals that are coming into effect in the second half. We have, as I mentioned, Superservice revenue that has increased in APAC that will drag into the second half for the whole 6 months. We have new SimplePart revenue in EMEA that came on during the half that will be there for the full 6 months in the second half. And so yes, you'll -- a view that the second half will be at least as good as the first half, even though we have the drag from the SimplePart churn, is where we believe we will land.

[Operator Instructions] It looks like there are no additional questions at this time. Jens, I'll hand back to you for any additional remarks.

Yes. Thank you, Kiara. Yes, I just want to say that, obviously, there is an exciting moment in time now with not only delivering on our organic business but also bringing new capabilities in. After my road show here, we'll immediately fly out to Europe. I will see our new Head of EMEA doing a roadshow there introducing him to all our major clients and also building with the Intellegam team 100 days plan on go to market, on R&D and on the integration of the both businesses. So yes, I'm excited, and I'm pleased to see that everything that was 2 years ago just a plan now comes into reality. And I would like to thank my team for driving this execution so nicely.

Thank you. Jens. That brings our call to a close. Have a lovely day.

Thank you.