NowVertical Group Inc. (NOW) Earnings Call Transcript & Summary

Okay. Awesome. Well, good afternoon, everyone. My name is Andre Garber, and it is an absolute pleasure to welcome you to our presentation today. With me today is Elaine Kunda, our Board Chair; and Sandeep Mendiratta, our new CEO. I'd like to begin by directing you to please review our presentation disclaimer on slides 2 and 3 of the presentation, entitled Disclaimer and Forward-looking Statements. A copy of our presentation will be posted on our website in connection with this webinar. And just given that we're not going to be holding a Q&A, we do encourage people to look at the last slide and contact us at the details found at the end of this presentation. And here's our disclaimer and forward-looking statements. So as you read in our press release this morning, we're very pleased to announce the appointment of Sandeep Mendiratta as our Chief Executive Officer of NowVertical. Sandeep joined NowVertical in January 2023 as the former CEO of Acrotrend during our Acrotrend acquisition. He has a proven track record of scaling businesses, he's a seasoned expert in the data analytics industry and a well-respected leader within the company. We'll hear directly from Sandeep later in the presentation. We're also extremely excited to announce the elevation of 2 of our business unit leaders as part of a top-level reorg intended to drive tangible integration efforts, reposition the company and accelerate global growth. Very exciting. So now I'd like to turn things over to Elaine, who will provide some perspective on the initiatives underway over the past several months that relate to today's announcement. Elaine?

Thank you, Andre. Hello, everyone. We appreciate you being here, and are excited by this evolving and maturing business. Over the past 6 months, we, the Board, determined that NowVertical was not fully maximizing the benefits from the integration of the company's acquisitions, nor was it effectively positioning its business unit leaders for success. The Board also determined that the current course of growth and the company's spending across the enterprise was unsustainable and with that a substantial -- would cause a substantial dilution to shareholders. So the Board, together with management, initiated some very important steps. We've identified, elevated and empowered our business unit leaders, as illustrated in today's announcement. Our strength as a company is in the knowledge and expertise of our business unit leaders, and we intend to continue to elevate key performers within the organization. The Board also determined that we needed to create an environment where all individual stakeholders were working together with the same metrics that were relevant to the company as a whole and not just to individual business units. To that end, we have commenced the renegotiation of commitments with these key stakeholders to ensure cash is paid out only when available, and ensuring that success metrics are company-wide and not specific to individual businesses. We've created efficiencies, both at the individual business unit level and the corporate level, significantly reducing our burn, minimizing redundancies and fostering synergies. These efforts will continue, and NowVertical will continue to be a careful steward of shareholder capital, which we take very seriously. I will let Sandeep speak in more detail to our efforts to service these tangible integration benefits, simplify our value proposition to customers and drive execution across our business. The Board believes that the company is now in a position to scale this business and is focused on growth by acquisition. We can go to the next slide. We're very proud of NowVertical's ability to attract some key new Board members and bring a critical mix of expertise and experience and the knowledge necessary for our proposed path forward. Our Board is very active, is highly engaged with management and is focused on driving value for our shareholders. I'm now pleased to turn things over to Sandeep, who will take us through NowVertical's plan for the year-end. Thank you.

Thank you, Elaine, and very excited to be here and taking this really prestigious position within NowVertical and really excited by the prospects we have at NowVertical. But just because you are hearing from me for the very first time, I just want to give you a little bit of a background on myself. So I've spent almost 25 years now in the data and analytics space. Have worked with many different businesses, especially one of the big 4 large consulting -- technology consulting company, Deloitte, and also some of the large global SIs, system integrators across the globe. And while doing so, I have been engaged with many of the global brands, the likes of say Johnson & Johnson in the pharmaceutical industry, Ingersoll Rand in the manufacturing industry, JPMorgan in the financial industry, Agilent Technologies, Accor hotels. Many of these brands, where I have been part of a very large transformation programs that were driven by data and also worked with global teams. And they were truly, truly global teams with some of the transformation programs having more than even 100 to 200 people for even 2 to 3 years programs. What I did 15 years ago was started Acrotrend, with the sole focus on the business intelligence and analytics. And in the last 15 years, what I've been able to do is build a really nice portfolio of enterprise clients. And while working with them, I had the opportunity to build a very scalable and profitable and sustainable business within Acrotrend. The transformation and the evolution of the technology have been part of that. It's been, I've seen the whole evolution of, say, on-premise technologies that were driven by the likes of Oracle and IBM in the past; to the cloud platform, the AWS, Azure and Snowflake and how the whole data analytics evolution has taken place. And more recently, how AI is impacting the way we deliver business values for these brands. So that's a little bit about the background, but very excited to be here and taking on the reins of this Chief Exec position at NowVertical. What I will also do is just basically give you a snapshot of, as we navigate into 2024, how we are building and evolving the strategy for NowVertical. And I'm here to give you some clarity on our vision and what is that aligned strategy for that vision. So that vision and strategy is built on 3 pillars, and these three pillars are really simple. One is we got to do proper integration into the business. We've got to make sure that we are simplifying our propositions for our clients so that it's much easier for them to buy from us. And of course, the execution, which is all about driving the actions from all the integration and simplification strategies that we are putting in place. And this basically boils down to the thing that -- I have been in the business for 1 year now, and there is no shortage of areas to improvise on in the business, which is really great, which is a great place to be in. But what we are picking up is the 4 areas as you see here in front of you. These are the 4 areas that, in our opinion, offer the immediate impact and sustainable long-term profitability. And this is what we are going to be laser-focused on. This is what we are going to be implementing with all kinds of perfection that we can put in place. And I just wanted to also mention that this is not just my strategy and vision, this is something that we have done in collaboration within the leadership team, and I will also introduce you to some of our leadership team members later in my presentation. Let's now take a look at, just as a summary, what is our position of strength or what we had to work with. If you look at all the 12 acquisitions, they all have been acquired because of their excellence and [ the drive ] for our clients in their data programs. And some of the things that we have amassed is we operate in 5 continents via these 12 acquisitions, and we have got 600-plus really strong technologists and consultants on board. We also have a phenomenal roster of 250-plus clients across the globe. And at the same time, we have gathered deep expertise on some of the cloud platforms like Azure, AWS, Google Cloud and Snowflake. And all of this has come together quite nicely where the -- some of the proprietary assets have also been acquired via these 12 acquisitions. What we wanted to really drill down into while we were building the strategy then is, the very first thing, let's look at our biggest asset here, and that's the roster of 250-plus clients that are across various industries and across many countries. When we drill deeper into those 250 clients, what we analyzed and what we found was there are 100-plus clients that fall in the category of enterprise clients. What I mean by enterprise clients are these clients that have got, say, $300 million-plus annual revenues. There are many clients that we've got, which are multibillion-dollar revenues as well. But we just focused on these enterprise clients. And what we also found is that there are 35-plus clients in our roster that have got a customer lifetime value of over $1 million. And that was really fascinating insight for us. So what that means is, if you look at one enterprise client, the potential of an enterprise client, they would be buying many different services from us. They could be buying, say, for example, a data platform service. They could be buying a data engineering service. They could be buying a business use case solution like reducing the churn or cross-sell and upsell, and they could be buying some managed services as well from us. The real worth of an ideal enterprise client for us could be more than $1 million in 1 year. And that's a massive opportunity, and this is the opportunity we are looking to unlock in the strategy for NowVertical. This is something we have seen across our business units. So it's not concentrated in one area of the business unit or the geography. This is really across the business units. And we believe what we need to do is amplify those efforts. And what needs to really happen for this to come to life is, really bringing about the account plans, the account teams and the frameworks and processes, and building the mindset so that we can really maximize the potential of revenue from these strategic accounts, as we are going to be calling them. So there is a clear signal -- as my point number one, there is a clear signal that strategic account growth opportunities provide a win-win. It's great for the clients because they can find one-stop shop for many different services and solutions, and its great revenue stream as well for us and we can keep increasing the customer lifetime value. So that's my point number one. We also wanted to look at how we are spread in terms of our geographies and where our clients are. If you look at this particular slide, here is our approximately $60 million revenue that's annualized revenue for 2023. And this is how our split of that revenue across our client base within the geography is. Now Middle East is really a very early market stage for us. We have been winning some really great contracts in the last few months, and it has really shown great potential to grow. What we want to also want you to pay attention on is that it's quite fragmented. If you look at LatAm, we have got about 5 different countries in there -- Argentina, Brazil, Colombia, Chile, Mexico. We just want to make sure that there is the significance of the revenue that we are bringing about here within the markets. And what that will give us is the direct accountability for growth also. So if you look at the market size in each one of these growth markets that we are operating in, they are quite huge numbers. And if you are to prorate our $60 million revenue there, we become quite insignificant in softer markets. However, if we are to consolidate these markets properly for ourselves and we bring the North America, U.K. and the Middle East together and we bring LatAm together, then we become a sizable market. And like I said, it is going to give us the direct accountability for growth in those markets as well. So that is our next point, which is, we are going to be integrating business units, creating that laser focus in targeting and measuring our greatest market opportunities. And this is how we are going to be operating in those markets now. So 2 clear markets for us to operate in. What we also have found is while we acquired these 12 businesses, we have also found that we use different languages, different jargon in many different industries and markets. And this is quite usual. Even if we are delivering similar services and solutions, we are still using different language. And that could be, at times, a bit confusing when we are trying to build this as a one big business within NowVertical. So one of the things that we are definitely going to be looking at is how do we simplify our propositions, so that it's much easier for our clients to buy from us and they can see what are the different kinds of propositions we can deliver for them. And this is how we are now structuring ourselves. It's going to be called as NowVertical's AI Solutions. The solutions are going to be business use case that deliver tangible business value like the customer acquisition, the customer satisfaction, the increase in cross-sell and upsell, reduction in your churn or increase in your retention. These are going to be our solutions within NowVertical. And on the services side, they are going to be called as NowVertical AI Services, and these are all our bedrock of the technology services that we deliver for the technology stakeholders within our client base. And they could be our platforming, data engineering work, AI and ML enablement, artificial intelligence labs, if you like, all of these are going to be within our NowVertical AI Services. And that really just simplify how our propositions are going to be laid out. Another important aspect is what we also have, like I said earlier, is we have got some software assets that have been built for a specific purpose, and they are really valuable and mission-critical at times for our clients. And what we are going to be doing is encapsulating all of these products and software assets we have got within something called as NowHub. And NowHub will be our one-stop shop for all kinds of product development, the products which are going to be completely aligned to our NowVertical solutions and services. So they will work really closely and in tandem with the solutions and services to deliver the outcomes and value for our clients. You will also see on these other data governance frameworks that we are going to have so that we create the safe environments for our clients to work in. The accelerated value realization with all the accelerators on the methodology side, which will really give the expected time to value for our clients. The agile delivery, which is our methodology, which guarantees success and sooner realization of the value. And then at the top, we will have the vertical intelligence, which is the epitome of our solutions and services for our clients, where we work with them in their industry, with their data, to deliver very tailored solutions for their industry. And that's how we are going to be bringing our value engines, which creates a strategic advantage for us against our competitors because of the embedding of the products within NowHub that are going to be infused in solutions and services. The key outcome that we will see for ourselves from here is the repeatability, reusability and transferability. That's what we are looking to achieve as an outcome from this simplification, so that we can deliver, time and again, those solutions with some automation on the product strategy as well and get much better margins for our efforts. This brings me to a very important aspect, which is our North Star statement. This is basically what we do as NowVertical in one statement. And this is the simplified version of everything that we are simplifying within our proposition as well. So that's the North Star statement, which is: Transforming the data into business value with AI. Which then can be dissected further into what do we mean by transforming data, it's the core competency of bringing all kinds of data together and structuring it nicely so that our clients can make sense of it and utilize it for delivering different business value use cases. And the business value is -- are those business goals and business use cases that our clients really experience when we transform the data for them. And leveraging the AI wave, the whole technology evolution within the industry, all of our solutions and services are going to be infused with AI technology evolution. And we will bring it in a very pragmatic way, working with our clients and understanding their needs and challenges. And embedding these AI solutions and services nicely. So that's our North Star statement, what we do in one statement. So this brings me to our third point, which is this is how we are unifying our global design strategy to create the clarity and efficiency in our propositional offerings, so that whoever we are talking to, in whichever market we speak with, we have a very consistent language and a proposition to put in front of our clients. And they can then see how much value we can continuously add to their business. The last point is about if we look at our propositional mix, what we have got is the solutions, like I said, which are delivering the business value, and these are some of the examples of those solutions we deliver for our clients. And then these services, which are the technology services, which gives us a fantastic entry point as well, a faster entry point into our clients because we can just bring our expertise and capabilities to them. The difference here between these solutions and services is that the solutions are higher profitability because they are a complex mix of various tasks and services together to deliver a particular outcome for our clients. Whereas, services are higher volume. Every client, every business needs, a lot of these expert capabilities that we have developed, and they are -- they offer us very fast engagement as well with the client. The conversation can very quickly lead into our engagement with the clients. So that's where the differentiation between the solutions and the services is. What we aim to do is -- our current mix right now is heavily driven, our revenue is heavily driven by these services, and the solutions form about 10% of our revenue currently and the products are just about 5%. What we want to work towards is a feature of this targeted mix of these propositions. While we are delivering fantastic services, which are absolutely the bedrock for our clients and any capability and any solution would require them, we are going to be working towards transitioning more and more towards solutions so that we can get higher profitability from our engagement with the clients. And at the same time, increasing our footprint with our products within our solutions as well for our clients, so that we bring in more of the automation and our EBITDA and gross profit would be really, really high. That's the transition that we will work towards, but making sure that we are keeping our proper focus on delivering what we are really good at, which are our services, technology services as the bedrock. So that's my point number four, very clear, which is driving the stronger proposition mix for greater profitability and deeper engagement that will be delivering long-term recurring revenue for us. And you can absolutely see how that will increase the gross profit, EBITDA and free cash flow. So those are the four key areas of improvement within the pillars of integration, simplification and execution [ as well ]. To deliver this, we definitely, definitely need a highly capable team, and this is what we have got to as our operator-first model. These are some of the leaders that have been identified from the business units, the business units that have been amazingly profitable on their own. They have delivered some innovative methods of delivering profitability into the business. And what we are going with is Santiago has been appointed as the Executive Vice President of LatAm, to look after that market, and complete responsibility and accountability of the profit and loss in that market and driving all of our propositions with our clients and grow. I will be responsible for the North America, U.K. and Middle East. And over time, we will evolve the structure even further. I have been quite hands-on with many of these strategic accounts in my whole career of 25 years, and I would love to be involved with some of the strategic accounts and work with the team to grow the business for us. Mostafa is going to be leading our product and technology stack So he is going to be the Executive Vice President for Product and Tech, and this is where all of our product strategy within the NowHub is going to be curated nicely. I just want to mention also Christine Nelson, who has been appointed as the interim CFO. Absolutely wonderful personality. Very inclined towards integration. Has built many processes to bring these businesses together. Many of the reporting KPIs have been the [ childbirth ] of Christine in the business, and we really look forward to working with Christine in this new role. Andre Garber, who has been the Chief Development Officer and the Director of Board as well, he is going to be -- his role is going to be continuing as a Chief Development Officer with some enhanced responsibilities. The integration of the 12 business units is going to be our task. And we want to make sure that it goes really smoothly. And with Andre's background and experience on involvement in all of these acquisitions, he's going to be a critical person to have in the team -- on the team to make sure that the integration is smooth. At the same time, we need to also engage with our capital markets quite nicely, and this is another area of focus for Andre. We will also be structuring ourselves for proper future M&A activities, and this is again going to be the area of focus for Andre going forward. So that's the team that we have got, which we are calling as the operator first model and getting the actual qualified knowledgeable experience business unit leaders into the right seats to drive the business. What I'm also excited about is the composition of the Board, which has been also refreshed recently, that complements the gaps that we may have within the leadership team on the capital markets, for example, and running the public businesses. And this business is very nicely going to be filled by the Board we have got. So we're really excited to be working with the Board on how we grow the business and continuously evolve our strategy. That's all of it, and that's my summary of all the 4 points within those three pillars. Here's a quick snapshot of our cap table just for your reference. And that is it. That's all. Thank you very much. Very nice to be in touch with you and looking forward to engaging with you even further. Over to you, Andre.

Yes. Thanks very much, Sandeep. And thank you, everybody, today who's attended this webinar. We're very excited about the opportunity ahead of us and confident that we have the right people and the right plan to drive value for all of our stakeholders. And as always, if you have any questions, feel free and we encourage you to reach out to our IR team. Thanks, everybody. Have a good rest of your day.