Mapspeople A/S (MAPS) Earnings Call Transcript & Summary

Good afternoon, and welcome to this Q1 presentation and Q&A with MapsPeople. With us today, we have the CEO and the CFO. First, there will be a presentation and afterwards, a Q&A where the management team will answer questions submitted via Stock.io. There have already been pre-submitted questions on Stock.io and the Q&A is still open so that you can submit questions live as well. I will now hand over the mic to MapsPeople to start the presentation. Your line is now open.

Perfect. Thank you very much. My name is Morten, I'm the CEO, and with me today, I have Christian, who is our CFO and we will try and distribute the time evenly, but normally, I take a little bit extra because I go first. But let me give you a little bit about the highlights from our first quarter of 2024. I would say like almost like just a boring, stable quarter, making solid progress on what we set out to do. But let me kind of like take you through this one. Here are some of the overall numbers that relates to our financial performance. We start with our annual recurring revenue. We have, in the past 12 months, grown around 52% in our total annual recurring revenue, which is a lot higher growth than we did from '22 to '23. In the quarter, so quarter-over-quarter, Q1 compared to Q4 of last year, we only grew DKK 1 million, which was a little bit below what we wanted to do. I'll get back to that on the next page. On our core growth product, which is MapsIndoors, you will see that we grew almost -- we almost doubled the business over the past 12 months, 93%, which is a significant improvement over what we grew from Q1 '22 to '23, which was only 19%. So we're very, very pleased about that. And you can also see at the bottom hand, that all the growth that we delivered in Q1 came from our MapsIndoors platform. That is actually precisely as we planned and we would just have wished was a little bit higher here. But it's still a very, very nice growth that we've delivered, and we are confident about this one. The third column we have here is our recognized revenue. How does this annual recurring revenue and these prepaid contracts, how they're actually translating into real revenue. And this is where we are very, very pleased with the results both for the past 12 months and for this quarter because we see that we have grown our recognized revenue at 65% compared to where we were at the end of Q1 last year. And you can also see that is more than twice as fast growth on our recognized revenue than we did the previous year. In the quarter, you'll see a very, very nice growth. You will see we've grown with DKK 4.1 million up to DKK 14.5 million. That corresponds to a growth of 35% in the last quarter in the recognized revenue. And the real reason behind this one is that all these partners and customers that we put live in the second half of 2023 are now fully counting in our recognized revenue in the first quarter of this year. So what we stated out to do last year, what we said would happen based on the growth in ARR from last year is also happening in the revenue. So this is really a good sign. That, of course, also impacts our EBITDA, where we have improved our EBITDA of almost 50% compared to Q1 of last year. And you can see in Q1 last year compared to 2022, it went really the wrong way because we were investing a lot in our growth, but you'll see a 50% improvement and you can see in the bottom side on this one that our EBITDA is now for the quarter is negative with 8.5%, which is actually a 5.9% improvement compared to Q4. So again, the impact that our contracts have on the recognized revenue is also impacting our earnings, but you can see that it has improved more on EBITDA than it improved on revenue, which is, of course, due to these cost savings that we implemented last year, where we simplified our organization and our structure and reduced the level of cost we're doing. So we see that these are now also impacting our results nicely. And I would say they are almost 100% implemented, showing the results in Q1. There's a little bit -- some of them came late in Q1, so you'll have a full quarter impact. So there will be a small improvement in the next quarter the way we see it here. Now that leads to like just a couple of comments on the guidance here. Our guidance on ARR is DKK 72 million to DKK 80 million. So you will see that there's around DKK 20 million to DKK 25 million way to go for us in the last 3 quarters. That is almost as planned. We will see us growing a little bit more in Q2 and Q3 than what we did in Q1 is how we see this. But the majority of that growth will come in Q4. And the rationale behind that is, first of all, Q4 is always the strongest sales quarter for an enterprise SaaS company. I don't know why, but it is. We have historically had the majority of our contracts are being renewed in Q4. And you also know that we have a very nice net revenue retention rate of 111%. We will come back to that one. And that will basically be put on top when we renew these contracts as well. And also when these contracts renew, we have our indexation of the contract to the price indexes coming in as well. So the majority of the remaining growth of our ARR will come in Q4 for these reasons as well. And I should mention that, that guidance is unchanged. Our revenue is also unchanged. Our guidance is DKK 58 million to DKK 63 million. The sharp reader will actually figure out that 14.5x4 is 58. So we are on very good track after the first quarter to reach this and definitely get in over the threshold. We do expect that the revenue will grow, revenue will grow as a consequence of us growing the ARR, so we feel very comfortable with that guidance. And the EBITDA is also unchanged negative, DKK 20 million to negative DKK 25 million, and we are with the improvement that I just presented on a pretty good path to deliver this. If I should say just a little bit more about ARR and how it translates into this one. We did a new booking meaning signing a new contract, which has -- which had a value -- an annual recurring value of DKK 3.4 million, which was a bit lower than what we wanted to do, and we need to catch up on this in Q2, Q3 and Q4. We did have one larger extraordinary customer contraction, meaning a contract we have at an existing customer that got reduced with DKK 900,000. That is kind of a one-off contraction. It happened in Q1. We thought it would happen a little bit later in the year, which is why the growth in Q1 ARR is relatively low. It was a module that we built for this customer about 2 years ago for some features that they wanted, and these features are now become standard in our product because a lot of other customers want it. So it was expected that this value-added service would disappear and be embedded in our standard product. It is still a very good customer. It's one of our top 5 customers, and it's still growing very healthy under this one, but it impacted us on a negative way a little bit sooner this year than we had anticipated. On the very good side, we signed a very large contract expansion with a U.S. customer. We added 3 years to a contract that still had 3 months left of it. And the total 3.25 years, 39 months, is a total contract value of DKK 5.2 million. And the extraordinary good news about this is that when the customer goes live, which will be early in Q3, they will pay the entire contract, all 3 years, upfront, which is -- which is, of course, very nice from a cash point of view for a startup company like MapsPeople. As I mentioned on the previous page, the ARR growth that we delivered specifically in the second half of 2023 is now showing itself in the recognized revenue, which is why we have this great growth. And combine that with the cost reductions we basically put in place in '23, it is impacting the EBITDA very nicely, 49% year-over-year improvement and 41% over the last quarter. And lastly, as I mentioned, we have kept our net retention rate relatively high at 111%, which is basically twice as good. I think the benchmark is around 105.8% (sic) [ 105.2 ] in that area to be precise. So we're performing very well. And that is particularly interesting because clearly, the extraordinary customer contraction that I mentioned on the DKK 900,000 counted negatively against this one. But of course, our expansion in bullet #3 counted positive. So even having this extraordinary reduction in a contract of DKK 900,000, we've kept the NRR at a very nice level of 111%, and that gives us a very good warm and fuzzy feeling around that KPI for the remainder of this year. This is just very graphically main revenue stream. You will see that all the growth comes from MapsIndoors, the lighter green bar on top of it. And you can see that the other licenses, which is predominantly our reselling of the Google Maps licenses is relatively flat. That is exactly as we have planned, and we've actually planned for this year to be relatively flat. I will say that we have initiated different things around our other licenses business that we will implement during the second half of 2024 and it is our ambition to start growing this one and see that having at least a slight growth, hopefully, in the second half of this year, but definitely through 2025 as well. Then I wanted to change a little bit gears and move away from the numbers, and then we go back to the numbers when Christian starts speaking in a few minutes because all this is super nice. And we have good people in the company who is driving the growth and improving our business to the best of our abilities. And I think they're all doing a pretty decent job on this one. But in the end, it is really the product who is driving the direction of a company. If you have a bad product, you cannot grow more than the market, if you have a great product, you will grow faster than the market. And we feel we have a pretty good product and we can grow faster than the market, and that's what we've shown, but we've also come up with some new stuff. So I just wanted to basically reiterate a couple of things and then show some things that has been put out there in the market and some of the results we're seeing. We have 3 overall value proposition that we try to help us guide how we prioritize stuff. And when it comes to what we really are, we are an indoor mapping platform and that means a platform that is included in other people's smart building application, right? We are the visualization layer where you can see the tables. You can see where the bathrooms are, you can see a lot of other things, you can see where your seat is in the stadium. You can find the X-ray department in a hospital, stuff like that. So we help visualizing stuff and real-time data on this. Now, number one, value proposition that we are driving is really being the best-looking indoor mapping provider that is out there. And some of you that has been following us know that we've launched these 3D maps with extruded walls, like you can see in this picture, high definition, so you can zoom in and get a lot of details in it. Make customized screens, desk tables and stuff like that. So it looks really good because if our map and that visualization platform looks great, the end users like it. That means that our partners will retain their customers. They will be able to win more customers because they look better than the competition. Their net revenue retention will be high, so they are growing their customer bases and they will retain their customers, so they will have a lower churn. So we really, really try to be the best-looking platform that is in -- I will not speak about that today. I'm just showing it here, and it's something that we have spoken about earlier. The second one is when you want a new indoor map of a building, if you are one of our smart building partners, you wanted customers and you need a map for that one, you want it fast. So we drive our technologies to be able to create a new map extremely fast because if you bought something, you don't really want to wait for it, right, you want to get it as soon as possible. And by the way, in this context, being able to create a new indoor map fast also means relatively cost-efficient and thereby competitive. And that helps, again, the net retention rate because you can deliver it fast, you could put it live fast if you're growing. It helps servicing the end customer satisfaction, which reduces churn and again, as I said, this is very cost-efficient. We're also not really going to talk about that one, but we're going to talk about some of the same technologies in the third core value proposition, which is fundamentally how do you update your indoor maps because we all know that there's changes inside the building. Meeting rooms are cut in half, instead of like an 8 person is going to be 2, 4 persons. Desks are moving around. Other things are moving around. You're moving from this floor to another floor. How do you update the maps? Because if a map is not updated, not accurate, it fundamentally becomes useless for a lot of things, right? And that generates dissatisfaction. And we have invested a lot of money being very efficient and fast and cheap and seamless on how we update these maps because that helps the partner get rid of problems, delays customer dissatisfaction that helps the partner grow. It helps with his positive customer satisfaction if this is working. It reduces the churn of the customers and actually, from our point of view, this is a very core differentiator why you should pick MapsPeople and not one of our competition because we are very, very good at this. And what we did here very recently, we launched a couple of things. Here's our toolbox, which we call MapsIndoors AI. That's fundamentally a collection of machine learning algorithms that are being put together. So it's becoming like the more that you do, the more AI it gets, right? And this is like recognizing objects, recognizing and replacing doors. They are like more than 5,000 ways to make a door in a CAD drawing. So how do we recognize that and replace it with the doors? It is like routes. If you want to navigate from where I am to somewhere else, and suddenly, we have moved a desk to somewhere else, then the routing has to change by itself and not have someone do that. So we can also do that stuff. So there's a lot that we can do in this one and we are actually in the process and fairly progressed in training that on the 25,000 buildings that we have mapped, thereby becoming extremely efficient. And what we did, we had a webinar fairly recently, earlier this month, actually, based on all the work we've done before Q1 and during Q1, which was a pre-release where we invited some prospects and some customers telling about this product, this new value-added service that will be launched later this summer, which we call Map Update Automation, which is exactly taking this functionality and capability of send us the map and what it does, it fundamentally recognize everything that has been changed. Some of the things it can change by itself, some of it will have to have people on. But today, updating map, 80% of the workload is identifying what has changed, and all that we have now automated. So now we have a lot of beta customers signing up for this based on this webinar, and it will be generally available. And we see this as a very positive differentiator. And just to validate this, here's a couple of the logos of the 107 companies who signed up for this event, and these are definitely not nobodies in our world. So we are very, very proud about this. And it shows to me that we are actually moving in the right direction. And with that, I will take a break, and we can go back to the numbers, Christian.

Maybe not random logos you put on the slide there, but shows a lot of interest in the product which is great. Great development on that. So let's jump back to the numbers and our performance in Q1 '24. As Morten alluded to, high level, our revenue grew from DKK 8.8 million to DKK 14.5 million from 2023 to 2024, which is a 65% increase. And I know a lot of our people following us, investors have kind of been waiting for the revenue hike to jump in after all of the ARR that we signed and started on in the second half of '23. And here it is. And it's, I think, a very normal that after some high quarters the revenue growth in the following quarter, it kind of kicks in because the full quarter effect ends up on the numbers. Of course, the revenue increase is the main driver for the improvement of our EBITDA, our result. An improvement from minus DKK 16.6 million or DKK 16.7 million to minus DKK 8.5 million. So actually, the EBITDA improvement is higher than the revenue growth, but also, if you look a little closer, you can see that we've capitalized only DKK 1 million in our -- of our own work, where it was DKK 3 million in Q1 '23. And that shows that there's actually an underlying even stronger cost efficiency in our setup. So all the external expenses are lower and our staff costs are materially lower. And as Morten said just in the beginning, the initiatives and the efficiencies, the savings that have been carried through in '23 are now showing almost a full quarter effect will be a little bit more in Q2. But we are around about the level we want to be at or we expect it to be at, but also we want -- we expect to carry forward with. So great profit and loss from our point of view with a good improvement of the numbers. And I think this is a new slide that we haven't showed externally before. These are the quarterly revenue and EBITDA numbers. And after I made this slide, I have to apologize to those of you who are colorblind, I chose green and red, I will change the colors for next time around. But the top graph here is -- shows the revenue for the last 12 months at any given period or last 4 quarters. So the last 4 quarters, if you add them up, we are now at DKK 46.3 million in revenue. And if you did the last a quarter back, which was our annual report, we were at DKK 40.5 million. So revenue grew DKK 6 million like-for-like last 12 months over the period. And it's done so quite steadily actually when looking at this rolling setup since -- well, since Morten joined actually in Q4 '22. It's not -- there a lot of good people at MapsPeople, it's not just Morten. But also the EBITDA has now the third quarter in a row with improvement on the bottom line. So the spending investment in the organization, in the team and the product is now more normalized, and we're seeing EBITDA growth come back to towards 0. So the last 12 months, we're now at a loss of DKK 51 million, where at year-end, it was just around DKK 60 million. And when it bottomed out, it was DKK 66 million. So improvements, the revenue growth is also showing up on the bottom line. And well, I think when we -- I'm not going to guide you guys here. But when we replace Q2 '23 with Q2 '24, there's a good chance that the charts -- the lines here will continue in the same direction. So zooming in on our core product, the MapsIndoors ARR, the cohorts for them show when the customers were signed, first off. And what you notice here is, of course, a stable growth in the total, now DKK 39 million in ARR from MapsIndoors but also that the last few years of new customers, so customers signing in 2022 and 2023 are really driving the growth of the MapsIndoors product. So this is showing a healthy net revenue retention. So the 2022 numbers of DKK 4.7 million, so customers signing in '22 delivered DKK 4.7 million in revenue in '22, in '24, they're at DKK 10.4 million -- over the last 12 months, they're at DKK 10.4 million. So a healthy growth on the existing customers from recent years, especially. And that's where the net revenue retention comes in at 111%. We had this large U.S. customer that expanded on a 3-year contract. It's, of course, only the 1 year that's included here. And then we had this partner contract with DKK 900,000 as Morten mentioned, but net bringing us together with the other developments at 111%, just like last quarter, compared to a benchmark of 105.2%, Morten, not 105.8%.

I remembered wrong.

Yes, you have to be careful with those numbers. But ahead of the benchmark as last quarter as well. So happy that our customers stay with us. And then the last point I wanted to get into here was our marketing efforts. I think there's been talk about our go-to-market approach, our change with partner focus, et cetera. Our CAC payback is how we monitor that internally, so how long does it take for us to get back our marketing and sales spend on getting new customers in. And it's flat here, I think it was 15 end of the year last year, and it's 14 months now. So when we have average contracts of around 5 years with our customers or not contracts, but relationships, then it's nice to see that the acquisition cost is paid back after only 14 months leaving 3.5 years-ish left to hit the EBITDA and further down in the P&L. I think that's it. That's what we had for you guys today. And then I know analysts have some questions.

Yes. Perfect. Thank you both, Morten and Christian. Let's jump directly into the Q&A and take the first question from the audience here. Is revenue evenly distributed over each quarter or do you in revenue have some fluctuations with high and low quarters?

So our accounting principle, we amortize revenue evenly over the contract period. So if a customer pays in 1 month, and it's divided by the 12 months where we deliver the revenue. So as a rule of thumb, all revenue is flat over a year. It is, of course, dependent on when we sign contracts. So with Q4 being a large quarter, then the increase will be higher in Q1. We also have some one-offs, proof-of-concept, stuff like that, but it's not very material in our numbers. So it is quite enough straight-line distribution, you can assume that. That's why 14.5x4 is a good place to say to guide on our revenue or start the guidance of our revenue.

Fundamentally, if we sign DKK 1.2 million new ARR in a quarter, then that will materialize as DKK 100,000 revenue every month for the subsequent 12 months, right?

And then we have the next question. You were not satisfied with partner growth in Q1. So what are you doing to speed up this process in Q2 and forward? Some things you might not be able to control, but what efforts are you making?

That's a great question, I wish there was a simple answer to that one. We wanted to sell more, like bring more new customers in and sell more to the existing partners than we achieved. But we had like kind of like a decent end of last year and sometimes Q1 is just weak. So that's part of the -- where we were not completely satisfied. The other part is fundamentally, when you work with partners, there's a lot of bulge on this one. For us we have platforms. Every time we have a new partner, that partner may have like 5, 10, 50, 100 salespeople who sells their solutions. Every time they sell 1 of their solution, they do sell 1 of our indoor maps. So that's a beautiful scalable model when everything is just on track. The issues when you work with a partner, you also lose control on the execution to a large extent, right, you don't decide how much they spend in marketing and how much money they have to it or whether they let go of salespeople or something like that. But more important to us is they have to implement technically our mapping platform into their smart building application. And that's a piece of engineering work that needs to get time on their road map. And sometimes, they will have priorities that comes up above that, and we get delayed. And that's very, very hard to deal with. And we have seen some of that in Q1 as well. It is not easy to work with because we don't set their priorities, they do that and they can come -- they can win a big contract from a big customer who wants something that they need to deliver and they have to delay everything else, including implementing our platform, right? So that is unfortunately the name of the game where we're working here. Now what we are doing to minimize that impact is, I wish there was just a silver bullet here, but there's many things, right? We need to continue making our product easier and faster to deploy. And there's a lot of effort. It's technology, it's engineering, it's documentation, it's processes, it's tools and a lot of other good stuff that we can do to make it easier and faster to implement. Sometimes, we have to handhold them, we need to give them a special platinum Slack hotline for their engineer to talk to our engineers, so we just kind of like help them. So there's a lot of different things that we continue working with, making it faster for our partners and customers to deploy our platform into their application post the sales. And we are working on all of these, like every day, we work on that, to be honest. So I know it's not a very concrete answer, but it's because the answer is very complex. But all we can do is all these aforementioned things to make it easier and faster.

And then maybe a clarification question around that. How many new partners did you close in Q1?

Yes. It was around a handful.

Then we have another question here. The Danish magazine, Vigeur highlighted that you now have a partnership with the Danish company AskCody. Was this closed in Q1? Or is it a new partner here in Q2?

I believe that was Q2.

Yes. April.

The article from Vigeur also states that you have around 75 partners. Is that true? And can you elaborate on how much the top 1, 3 or 5 partners are contributing to your revenue?

Yes and no. I think we have around 50 live active partners. We also have some that are dormant when we move from like framework contracts to prepaid platform licenses, we also cleaned up a lot of stuff. There were some that left. And what's important for us is now to count the ones that goes live and they're active so they help us grow. That's around 50 right now, and we added around a handful of those in the first quarter. I believe it probably has been around like 75, but some of them were inactive. So they never really contributed to the business. So we decide like if they don't want to get started using our product and help us growth, then we shouldn't count them as a partner. I hope that answered the question, provided a little bit more clarity about this.

And do you have anything to comment on how much the top 1, 3 or 5 partners are contributing?

We do not do that, but we have at least 2 partners in our top 5 customers.

You only added 2% in AR from Q4 to Q1, but you still expect to grow to DKK 72 million, DKK 80 million in ARR by end of the year. Will this be evenly distributed over the next 3 quarters? Or do you expect it to land in some specific quarters?

No. It will absolutely not be evenly distributed, right? Clearly, every quarter needs to be better than Q1. That's mathematically Q1 and we feel comfortable both Q2 will be better and Q3 will be better. Q3 is tricky, specifically in Europe because it's a summer holiday quarter, right? But the big quarter for us is going to be Q4, which I tried to elaborate a little bit about in my entry. For enterprise software companies, Q4 is just historically always a big quarter because the companies get their budgets, they need to buy something. They need to be ready to grow for next year. So you just buy the software that help you grow and get in the end of the year. So we have historically always closed more business in the fourth quarter than any other quarters. Unfortunately, nothing that indicates it's going to be different this year. So that's how we build our plan. and that's how we're looking at it. We also have a lot of customer expansions like our net retention revenue of 111%. That normally comes into place when contracts run out, and the majority of our contracts are up for renewal in Q4. And in the vast majority of contracts, we have like price indexation in if they have high inflation, then we can basically increase our prices with the inflation rates. And clearly, that is also when contract runs out and the majority of the contract runs out and gets renewed in Q4. So there's just a lot of length. The world is just the way the world is. We closed more business in enterprise software in Q4 than any other quarters. And since you do that, all the NII impact is also stacked on top of like the previous year's growth distribution. I think that was as precise as I can be.

Yes, Perfect. Have you introduced any new software features or important technological updates in Q1 that you can share? You have already discussed some, but do you have anything to add in this regard?

I would just say, like, on the first one, like having the best-looking maps, we've come pretty damn far down the road, and we are now seeing both existing partners wants to migrate into these 3D high-definition maps. Like you saw some of these drawings and these can be like fairly customized in colors and furniture type and stuff like that. And it's also helping us attract a lot of new partners as well. So we keep introducing new stuff here, and you'll -- yes, there's -- like every month, there's new stuff coming in here that makes them look cooler and nicer. And one of the other things was just like a map update automation value-added services that I just shortly alluded on where we -- earlier this month actually had this webinar where we kicked this off. It's really something that comes from some of our very, very large customers where we built what we call automation. And now we started training all these algorithms so that they're becoming AI and then we've taken that and basically pooled it down and democratized that solution into the mid-market segment, and we call it Map Update Automation. So lesser advanced enterprises and organizations can actually utilize these updated map functionality line. That is being extremely well received, to be honest.

So we've maybe not launched new products, but we've launched a lot of new features, functionalities, automatizations within our core product, which grows with 93%. So we felt that was a good bet to focus on that, and we're also working on our licensing business and stuff like that. So it's not a new product launch, but a lot of new features.

Yes. 100%.

And then there's a kind of a clarification around that as well. Are you training your AI and machine learning models yourself or rely on external publicly trained models?

We train them ourselves. There's no one who's done this. The good thing is we've mapped 25,000 buildings. So we have an inventory to train it on.

5,000 different kinds of doors. I still want to see them lined up, to be honest.

Different ways of making a bathroom.

And that was actually all the questions so that finalizes the Q&A. And before we also end the webcast, I will just hand over the word for you if you have any final remarks to end with you.

No, I think this was a good coverage. We are -- we're, in general, happy. We are super glad to see that all the work we've done last year is now materializing itself in our recognized revenue and particularly in our EBITDA and that these curves are pointing in the direction that we said it would, and we are eager to continue that journey and show you how far we got in about 3 months from now.

Thank you for listening.