Spotlio AS (SPOT) Earnings Call Transcript & Summary

Welcome to the third quarter presentation for Canopy. Some might think it's strange with Q3 now, but the reason for that is that we have a deviating financial year starting in May ending in April, so Q3 is for the months November through January. I'm Ivar Blekastad. I'm Group CFO in Canopy. The CEO can't be here today, unfortunately. So I will be running the presentation. Just to have a recap of what Canopy is about. Canopy is a holding company which owns several entities, which again own several brands. And together this is a group of companies forming a platform to help resorts and attractions to improve their key processes through digitization. And I will come back a little bit what the different entities here actually deliver in that respect. I will start with just going through some highlights, then I will go quickly through key financials, and then dive a little bit down into these operational entities, which I showed you at the brands on the former page. And then I would like a quick summary, and then we will have a Q&A session. And please post your questions as we go along, and we will answer them at the end of the session here today. So key highlights for the quarter is that, we had the revenues of NOK 27 million. We had the B2B recurring revenues of NOK 75 million in ARR, or ARR and transactional net revenues. EBITDA was minus NOK 10 million. We had 233 resorts end of the quarter, and we had a cash position of nearly NOK 100 million. A couple of other items we want to mention here is that we merged the Skitude branch in Spain into the Spotlio entity. We did that early December. And as you might have noticed before, we have announced it, is that we'd changed the name of the holding company from Skitude to Canopy Holdings. Then I want to go into the key financials, and a backdrop a little bit to understand, I mean, it's that, yes, we have been COVID impacted this ski season. There has been a lot of skiing activity. And as you can see on the right-hand side, there is a snapshot from our dashboard on the Skitude apps, and it's, I mean, lot of activities. More than 11 million sessions recorded. That's almost a tripling since same time last year. And on the chart below there, you can also see that it has been quite much higher than the pre-COVID season in '19 to '20. But even if the skiers are back in the slopes, there has been factors that are impacting our transactional business, and I've listed some of them here. I believe we have also addressed these in previous announcements. And -- but I think we haven't mentioned before is that, we have seen a quite slower volumes now, especially in February, compared to last year, and we believe that is related to a shift in buying behavior. Last year, skiers were uncertain about COVID, so they didn't buy tickets until they knew that resort will be open. This year the uncertainty wasn't that large, so they prepaid a lot of tickets already in November. So we had 100% same-store growth in November. But in February, that came down quite much. And also, we believe that it was a pent-up demand from skiers in February last year. But we haven't seen the same way this year. So if we look at our KPI development, we recently sent out a separate KPI announcement which showed the KPI up to January and from the -- for the third quarter, which showed a sequential growth of 15%. Here, we have added one more month. And altogether, since October, we have added over last quarter, we added 9 resorts. There were 6 transactional resorts and 3 B2B SaaS resorts. If we look at increased revenues, they showed a very strong increase every month up to January, but in February it has been a little bit dip down, and that's mostly related to the negative same-store growth from the ski resorts. And in combination that we haven't closed any new resorts in that month. But all-in-all, from April to February, we have had a year-to-date growth of 20%. If you look at the transactional business from May to February, it's 30% growth. Another thing is -- to pay attention to here is that, the increase in parks and attraction from 15% in May to 28% in February, which is more or less doubling. And as we showed in the last KPI update, most of the growth in transactional business has come from parks and attractions. So that is -- of course, we have a bit of weak February from the skiing resorts, but we expect that the increase in the number of parks and attractions will give us quite a good growth for a summer season starting off in April. And this slide which tracks our trailing 12 months of transaction net revenues per resort, which throughout the season last year showed a very huge growth, and then also it grew again in November because of this strong prepaid sales, has kind of been a bit down since then. Both in December and January, we saw year-over-year growth of some 5%, but in February, the year-over-year growth from February last year were actually 19% negative in the average for all these resorts that we had both this February and last February. And the explanation for that, I believe, we touched upon in the previous slides about COVID implications. Our financials also then show some effects from what I told till now. Revenues were disappointing, negative 5%, and there are 2 factors to that, as I see it, both negative same-store growth both in January and February. But in addition, Catalate actually processed more resorts last season. These were resorts what we're transitioning out of Catalate because of bankruptcy. And they have found other suppliers, but they haven't moved over to them yet. So Catalate processed these winter season last year. So if you were doing pro forma and adjusting out those, it would have shown a positive growth. Other things to pay attention to in this P&L is that, we had a quite huge growth in personnel cost, and reasons for that is that we have employed people in the Holdco, that's among others, me and Bent. I started in March last year and Bent in February. Spotlio was closed end of December. So last year, we had only 1 month with Spotlio cost, and we have invested quite heavily into rebuilding the Catalate organization. They started off with 20 employees in January last year, and now it's around 35. All in all, we are now 84 FTEs at the end of the quarter. So now I will go into -- a little bit down into the -- some of these entities that I showed at the start. And first I would just compare different business models for our B2B business lines. And the reason for that, it's -- because they are different. For Spotlio and Skitude, they are straightforward SaaS. So that should be an unknown business model for most investors. For Catalate, it's different. They don't have an upfront agreed payment each year, but they get commissions for all ticket sales that are running through their products. So of course, you can see they have that a little bit down in February this year because the same-store growth was negative. But all in all, we expect that the digitization and shift to online will increase over time for resorts and then we will grow with this shift to online, because we will process those online payments. If you look at the gross margin, it's also quite low in Catalate, and the most -- the reason for that is that, we also are passing through credit card fees so through the resorts and then we need to pay the credit card fees to the card providers. And if we look at CAC, also quite different, in Catalate it's -- you're talking about months. It's so attractive. And a good thing about this business model for SaaS -- and it is more normal SaaS. And also for collecting payments it's also different, because SaaS -- you send out invoices upfront for the license period and you collect that. In Catalate, we are getting cash as we are processing the tickets. But we don't have any counterparty risk. All this collections is done by Stripe, and we have the cash in our account 2 or 3 days after the transaction. And both business models have -- is recurring, renewable agreements. We have more multi-year agreements on Catalate. Actually, majority of agreements are multi-year and it's increasing because most of new customers are signing multi-year lease, and Spotlio, Skitude it's mostly annual renewables. So if I now just go a little bit more into Catalate to try to understand that a little bit better, they have a leading e-commerce pricing engine and products. And here is some reference right there about dynamic pricing. I'm sure most of listeners here know what it is, because all the airlines do it. But for these segments, Catalate is leading. They have done this for a long time. They have built up a very strong engine based on, yes, more than $1 billion in sales, tens of millions of price requests and price points and transactions for number of years. And they have tweaked it and improved it to the best possible way to generate the most optimal pricing for the customers. And as we get more data, we will even do this even better. So kind of a competitive advantage will grow with even more volume. And the value proposition for the customers here is quite strong. I have listed benefits here. Don't want to go through each of them, but conversion ratios we are able to maximize, and we are able to maximize revenues for the resorts, and those resorts have a given capacity. And if you look at the right-hand side here, we actually expect all operators that have these characteristics to convert into the dynamic pricing. There are good reasons for airlines, hotels, and Uber and others already have done this. But now it's coming to the parks and attractions and ski resorts as well. And here, I've just taken out one of the customer references we have in our blog. Please go into that blog and read about more references, if you like. I have here picked up the most easy to understand and maybe the most compelling ones. It's 2 resort customers of Catalate in the same area, with the same size, with the same walk-up price, but with different pricing strategies. Partner B run just a flat price throughout the season, like most ski resorts and others are doing now. But Partner A, they applied the dynamic pricing strategy. And what we were able to see after a season was that, Partner A with the dynamic pricing strategy getting more revenue, more or less every day throughout the season, also the low demand days and, of course, the high demand days. All in all, the partner with the dynamic strategy achieved 57% more revenues than the other one with a flat pricing strategy. So this is a very strong value proposition for resorts. And with a strong product and with strong value proposition, Catalate is growing and doing very well in the market. Here, I have just showed a transactional recurring revenues from May. And from May to January it grew by 45%. And in -- at the same time, we rebuilt the Catalate organization. So starting last year, we only had 5 FTEs in sales and marketing. Now we have 11, more than double, and there will be even more end of season. So starting next financial year, we will have a much stronger sales force than we had beginning of this financial year, and that sales force will attract a very large market, very attractive market, because this dynamic pricing is now happening in ski resorts and parks and attractions worldwide. And it's talk about penetration. It's not talk about taking market shares from competitors. It's about convincing these resorts what they will benefit from converting to that pricing logic. So just based on the parks and attractions and ski resorts worldwide, you see some quotes or numbers of how many there are. We have estimated the total markets -- addressable market for Catalate products to be around EUR 1.5 billion. And there is more, because there's a lot of other segments as well, but this makes a lot of sense for -- to do dynamic pricing. We have museums, so zoos, we have immersive experience, events. It's a lot. So there is a very huge potential for Catalate. If I go into Spotlio for a while, I just want to then reiterate that we merged the 2 entities together, and combined they have more than 170 destination resorts customers. They are a little bit more than 40 employees. App downloads have been more than 3 million, and they have run a lot of sales also through their booking systems to deliver to their customers. And if you look a little bit more about what products we are offering combined there, there are very strong products. Interactive digital maps come from Skitude. Direct booking come from Spotlio. Mobile apps come from both. Data communication, that's more like running operations inside the resorts. So we communicate with the people, the ski guards, everything, so you are able to manage the people working there. And for especially Spotlio products, these are loved by the customers. There have not been one turn since I started in Canopy. And actually, the net retention here is 125% so far this year. What I want to show next is kind of the little bit obvious benefit of combining these 2 entities. Here is a customer portfolio of Spotlio, which is predominantly North America. Here is a customer portfolio of Skitude which is predominantly Europe. And in combination, they have an unmatched footprint across both North America and Europe. No other tech provider to ski resorts have something like this. And this generate a lot of opportunities for cross sales, upsells between Spotlio and Skitude, and also to add other products on top to increase ARR from the existing customers. And it also offer a big pool of existing relationships for Catalate to upsell pricing products to. There is no overlap here and with existing customer portfolio of Catalate. So that is something we're really going to work on going forward. So, just to summarize what I've been through now. It was a disappointing quarter in terms of revenues, and -- but that's mostly related to COVID as you see it, and the transactional part of our business. But, as I also mentioned, we have almost doubled the number of parks and attractions customers now. So we expect and see -- us to see a quite strong growth starting from -- already from April and going through the summer season and the first half next year. We are very strongly positioned with leading products within dynamic pricing with a very strong value proposition and a track record towards a shift to dynamic pricing, with all these lessor resorts around the world, which now have started to also apply dynamic pricing. They are behind hotels, airlines and visitors, but now we are really also going into that. And we have an unmatched footprint with ski resorts across North America and Europe, which offers a lot of upsell, cross-sell opportunities going forward within the group. So with that, I want to end my presentation, and I will open up for Q&A.

Yes, question, why is Q3 revenue lower this year compared to last year when the world has more opened up this year. I'll try to explain it. Combination of some factors -- COVID factors impacting the timing of sales, and also less travel into ski resorts. So it have been more season passes, fewer day tickets and more presold tickets this year compared to last year. And then that's what we are able to explain now. And in addition, as I also mentioned that Catalate processed more ski resorts the last season. Another question. Could you give some flavor on expected development in transactional net revenue per resort of the current reserve base? Yes, that's a bit difficult. We had hoped to see an increase also this season. We saw a big increase last season. I commented a little bit on that. But Catalate last season processed approximately 30% of a normal year's visitors volume of day tickets in the resorts they are servicing. So even if you had a little bit setback this February, in the longer run, we expect that to increase. I'm not sure if it will go to 100%, but at least it should -- Catalate should process more than 30%, as these resorts are increasingly going online. This is [indiscernible]. Skitude going forward, given now it has a NOK 0.6 million in ARR and 109 resort partners? Yes, that's a good question. We are working on that. First of all, it offers -- I believe it offers a quite -- we are not able to charge the value of what these apps are providing for the resort. So we should be able to increase prices. We could also launch self-service apps to several thousands of resorts and cut out our direct sales force from -- for that. And we can also -- the Skitude is just sitting on an immense data set of skiing activity in resorts and also outside resorts, because they are inside the app and doing different things, both in the resort and also when they are at home, or traveling between the resort and home. So actually at 60% with time variance that is outside the resort. So there must be some products we can make to leverage those data volumes. It's no one other actors in the world that sitting on so much data about skiing behavior in resorts with Skitude. But that's something for the longer term. There has been once a corporation with Alturos being announced. Is this cooperation still on? Or do they go separate ways? Now that partnership is on. So far that has given us one resort in Europe, and we are working on it to try to leverage it even more. But so far, it has only been one, trying to get more. Yes, I think that was it. There was some questions from one of the analysts. I recon to do that one-to-one because they are little bit technical, I think. Second, I'll come back to you on that, if that's okay. Other than that, I don't see any other questions. So -- and we are about time. So then I suggest we conclude here. Thank you all for participating. And I -- of course, I'm available to -- for answering questions later, and also, going forward. You just send me an e-mail, so I can try to answer if everyone has anything more. So thank you all for watching this today, and I wish you a very nice day.