Spotlio AS (SPOT) Earnings Call Transcript & Summary

Hello, and welcome to Canopy Holdings Q3 '22/'23 presentation. I'm Christian Erlandson, your CEO of Canopy Holdings. And joining today is James Price, our CFO. And I would also like to welcome all the many viewers I see on the screen. We're going to be starting off today by taking you through our growth strategy. Then we're going to be sharing our Q3 highlights, leading into the financials and KPIs and then wrapping up the session with our guidance for FY '24. And after that, we'll take your questions. So starting off, our mission, what is Canopy all about? We empower attractions, water parks, ski operators to maximize revenue and connect better with consumers through a simplified one-stop-shop digital experience for the guests. And we have built a -- what we're trying to build is a sustainable future for Canopy and for our partners by creating a purpose-driven organization that addresses the mega trends in the industries that we serve. So what do we offer? Let's take a look at how we segment our product portfolio. As you can see, we've segmented across 8 propositions, and I'll start by talking about cloud store commerce. Those are leading e-commerce solutions for both the parks, attractions and ski resorts, driving all the sales of tickets, online bookings, et cetera. On top of that platform, we have the Pricing as a Service. That is a dynamic pricing model that allows the resorts and attractions to offer consumers a better price and really drive a lot more traffic earlier on in the funnel. Moving on, resort apps. We built over 100 apps for the resorts. And as you can see here, we have a 4.6 rating in the App Store, and that's from over 30,000 reviews. On the map side, we've mapped over 2,500 mountains. That is pretty much every ski mountain there is in the world. So impressive mapping services. And underneath that platform is a community of many, many skiers that we'll talk about a little bit more. So exciting, very expansive product portfolio. And why have we done this? We've done this to solve problems. On this slide, what you see here are the issues impacting the resorts and attractions, and it also talks to the problems that we have seen. The issue is that the value leakage takes place at each of the customer touch points along the sales process. And if you plug that leak, you capture the value. Let me touch upon 1 or 2, starting with the outdated customer journey. Previously, customers would purchase at the gate, ski right up the gate and buy their ticket. Bringing e-commerce to the market allows the operators to see a dramatic increase in overall revenue, and we have great stats to back this up, but they also have more predictable revenue and more and more customers purchasing in events. This also allows the resorts to actively manage how they're staffing throughout the season, which is often a real common issue that they share amongst each other. And with more customers purchasing in advance, we reduce that unpredictability that's inherent in the business model. Today's modern consumer has moved on, but the process remains really inconvenient, and it's certainly not customer-centric. So there's the problem, and we have a solution to address this that we'll see on the next slide. Essentially, what you see here is we've placed ourselves at the heart of the system, and at the same time, we're plugging the value leakage that I've just discussed. By putting ourselves right in the middle of the ecosystem, we're providing connectivity and transparency to all the key constituents. Canopy connects all key constituents in all aspects of the resorts from e-commerce, pricing, mapping, to communication. We provide every aspect of the operation from tickets to rentals, activities, providing higher ROI solutions that are also incredibly sticky and incredibly powerful. And not only are we doing this, but we're doing it at scale, and we've created a global position in the market. One could spend a lot of money to recreate the technology we have but not the relationships that we have with the resorts and attractions. So it will be really hard for a competitor to try and displace us. We know the optimal consumer journeys for e-commerce, and we know how to customize it for both the ski resorts, parks and attractions. We transformed a process that was old, clunky, archaic, and we brought it bang up to date. And we've done it by helping our clients deliver optimal solutions and experiences to their customers. To do this, we needed to pull together all the right capabilities. And by this, I mean that the underlying businesses within Canopy Holdings coming from Catalate and Spotlio as you see their brands throughout our product portfolio. So why do we do it all? We see a huge potential in the market, starting with ski resorts. And as you can see here, it's a massive addressable market. Over 2,500 ski resorts, 200 million visitors and an expected market size of over NOK 135 billion, plenty, plenty to go after. And what does this look like for us, Canopy Holdings? You can see here, we've got 20% of the resorts within North America and 10% within Europe. So plenty for us to go after. And in the parks and attraction side of things, even a bigger addressable market with over 3,000 parks and attractions throughout North America and Europe and over 140 million people attending just the top 25 attractions. And this is -- we -- about 2 years ago, we began to move into the parks and attraction space. So there's no surprise here, we've got 2% of the market in North America, so even more potential for our business. And we've had quite fantastic results with the growth over the last 2 years that James will take you through a little bit later in the KPIs. So our progress so far, going through each of these key metrics, for us, it can be Holdings, ARR is what drives us. We're very focused on ARR. It's over 95% of our revenue model, growing at over 35%, an impressive low turn with less than 4% and the global merchandising value, over NOK 350 million annually flowing through our platform. It's very impressive. And today, we have over 230 resorts. And the user community earlier, I mentioned the propositions around the community, we have a community of over 1.4 million skiers, impressive, impressive today. And transactions since starting the business, we've processed over 1 billion transactions. And here, I'll show you -- this explains the businesses that were acquired and put together at the point of the IPO is made up of Catalate and Spotlio with very complementary propositions, managing the business by the holding company. And here, you see some of the underlying metrics for those specific businesses. So as you can see here, we're working with customers all over in many markets, supporting them in multiple languages. We've got a lot of recurring and long-standing relationships with these customers from Arosa Lenzerheide, all the way up to Whistler. Today, our core focus is North America and Europe. So with these great customers, we have an opportunity to grow with them, and they are keen to do more business with us because of the value that we bring. So now moving into the Q3 highlights, I'd like to hand over to James. Thank you.

Thank you, Christian. Just to take you now through the main highlights of the third quarter. This is the period from November 1 to January 31. In terms of revenue, we are reporting NOK 27.9 million, this is a 4% increase year-on-year, and a cash position of NOK 16.8 million. In terms of KPIs, as of February '23, we're currently at EUR 0.2 million in ARR with 232 B2B resorts and attractions. In terms of main actions, focus points in the quarter, we've continued to assess cost-optimization initiatives focused on improving the current cost structure while obviously not taking our eyes off the ball in terms of top line growth. And that is as well another highlight to mention this quarter, we've had 5 key wins. The ski business to parks and attractions from Europe to North America, some significant logos added during the quarter. I'll now briefly just take you through the financials for Q3. In terms of the income statement, revenues, as mentioned, grown 4% year-on-year. This is largely driven by an increase in SaaS revenues where we've seen a strong expansion in the existing -- the expansion of existing customers. This change in revenue mix leads to slightly higher gross margin, around 66% versus 64%, which we see in the same period last year. In terms of cost, we start to see the effects of the cost-rationalization initiatives taking place in December. Personnel expenses, as we see here, increased 5% year-on-year although we do have a significant effect of the weakening Norwegian krone, and that actually translates to a 9% decrease in the quarter at constant currency, removing the FX impact. Here, like I mentioned, we start to see the levers left the business during the period. And also, we start to see the first effects from December onwards of those initiatives, which we made. In terms of other operating expenses, also 7% lower, again, in constant currency, mainly lower marketing, consultancy spend, slightly offset by increased travel costs in FY '23. And that leads to total EBITDA of minus NOK 8 million, which is an improvement on the minus NOK 10 million from the same period in the prior year, with the net loss coming in at minus NOK 16 million in comparison to the NOK 19.9 million in the comparative period. I'll briefly now take you through the balance sheet. Main items to touch upon here. First one is our cash position, which currently stands at NOK 16.8 million. This, I will discuss more in the next slide when we take a look at the cash flow statement and the trade receivable balance we see here, which stands at NOK 12.6 million as of January 2023. This amount will significantly decrease as the outstanding balances are collected throughout Q4. And then in terms of cash flow, net change in cash for the quarter, negative NOK 9.8 million. This is significantly down from the NOK 18.2 million in the same quarter last year. Looking towards Q4, we expect a similar trend, a significantly lower cash burn than Q4 '21, '22 with over NOK 20 million annualized taken out from the cost base when in comparison to prior year. We also expect significant cash inflows from the trade receivables which we saw on the balance sheet. And we would like to reiterate, we have sufficient cash runway to take us through to the end of fiscal year '22, '23. Just a brief update on KPIs. In terms of number of B2B resorts and attractions, currently stand at 232 as of February 2023. Here on the left, we see the effect of the 5 new logos, which we touched upon earlier, 2 of them coming in the B2B SaaS segment, with the remaining 3 coming in the transactional business. And on the right, we see how that then flows into annual recurring revenues with EUR 100,000 net increase in ARR in Q3 for the SaaS segment and EUR 150,000 for the transactional business. Total ARR growth was 3% throughout the period of Q3. Now I'd just like to kind of unpack some of the figures we've just seen there in the KPIs and take you through some of the strong growth drivers in terms of segmental evolution, which we maybe didn't see in the previous slide, starting with the strong e-commerce growth in European ski. Here on the left, we see a consistent month-on-month and year-on-year growth in trailing 12-month commissions for the Catalate business within the European ski space. So February 2023, we see 22% higher than February 2022. And on the right, we see the evolution of the winter season so far. This is typically from November to February. Obviously, we're still within the winter season. We still have some additional periods to come. But as of today, we've outperformed FY 2022 in every individual month with December, in particular, showing a very strong 28% upside. Another example, I'd say an even stronger growth in parks and attractions. This is the global parks and attractions segment within the Catalate business. This is a significant growth opportunity for us going forward. It continues to grow in terms of the proportion of the business which this represents, and it enables us also to reduce the seasonality in our overall business, which has a seasonality obviously towards the ski season. Here, we see similar trends, consistent month-on-month, year-on-year accumulation of the trailing 12-month revenue commissions, 43% higher in February '23 when compared with February '22. And on the right, we take a look at what would be a summer season. A lot of our parks are not just summer-based. They're all year around businesses. But looking at the kind of the peak summer season, typically from May to August, we see here once again that we're outperforming in FY '23 versus FY '22 in each month within particularly July, seeing a very strong 37% upside. And with that, I will hand back to Christian, who will take you through the summary of the growth strategy.

Thank you. Thank you, James. So yes, I'd love to just quickly summarize our growth strategy for the future. We're going to continue to execute on our North American or European expansion, the cross-sell and upsell opportunity that I mentioned earlier. We have over 90% of our customers only purchased one proposition. So the opportunity for cross-sell, upsell is very apparent. We also see growth through partnerships by leveraging our dynamic pricing by embedding that in point of sales and other e-commerce providers offerings. So continuing to scale, drive growth with a keen eye around profitability. So with that, I think it's important for us to look ahead and forward for our guidance for FY '24. So we look to end FY '23 around NOK 80 million and growing next year about, on average, 35%, which will get us to greater than NOK 110 million. The cash burn we see for FY '24 is approximately NOK 15 million with an expected reduction of around 70% compared to FY '23. And the seasonality of our cash flow is still very present. However, our revenue profile and the mix of revenue is improving with the parks and attractions. At the moment, it's about 25% of our revenue. But we see in the not-too-distant future, it could be 50% of Canopy's revenue overall, which smooths out that curve and the cash burn need throughout the year. So with that, I would like to pause and take a look at some of the questions you have coming in here.

So the first one, I'll take. Does Canopy have enough cash to operate through this quarter? The answer is yes. As we've gone through before, we've reiterated that we have sufficient cash runway to take us through end of fiscal year, which is April 30.