Urbanise.com Limited (UBN) Earnings Call Transcript & Summary

Ladies and gentlemen, welcome to the Annual General Meeting of Urbanise.com Limited. My name is Almero Strauss, and it is my privilege to serve as Chairman of the Board. I declare that the quorum is present. Accordingly, I declare the meeting open. I would like to thank each of you for your attendance today via the Lumi Online Technology. This allows shareholders, proxy holders and guests to attend the meeting virtually. All attendees can watch a live webcast of the meeting. In addition, shareholders and proxy holders have the ability to submit questions and votes. Questions can be submitted at any time. To ask a question, selective messaging tab at the top of the Lumi platform. This will take you to a section for you to type your question. Once you have finished typing, please hit the arrow symbol to send. Should shareholders or proxy holders wish to ask a question verbally, please follow the instructions on the Lumi platform, which will direct you to a series of phone numbers that you can use. These numbers will allow you to speak and present your question at the appropriate time in the meeting. Please ensure that prior to speaking, you mute the Lumi application to prevent sound feedback occurring across the platform. Prior to putting your question to the meeting, please state your name and be relevant to the name of the shareholder you represent. Please note that while you can submit questions from now on, I will not address them until the relevant time in the meeting. There will be 3 opportunities to ask questions after the CEO's address, following its resolution and 1 small prior to the end of the meeting. Please also note that your questions may be moderated or if we receive multiple questions on 1 topic, amalgamated together. Finally, due to time constraints, we may run out of time to answer all of your questions. If this happens, we will answer them in due course via e-mail or on our website. In the event that I am disconnected from the meeting and cannot immediately rejoin due to technology failure, Tod McGrouther will assume the role of Chair of this meeting. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. I would encourage you to begin voting for the resolutions once voting is open. At that time, if you are eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring up a list of resolutions and present you with voting options. To cast your vote, simply select 1 of the options. There's no need to hit a submit or enter button as the vote is automatically recorded. You do, however, have the ability to change your vote up until the time I declare voting plans. Let me begin by introducing each of your directors in attendance today. We have with us Saurabh Jain, CEO and Executive Director; Tod McGrouther, Non-Executive Director; and Sam Cuccurullo, Non-Executive Director. Mr. Pierre Goosen, Non-Executive Director, is not able to join us today. I would also like to introduce Simon Lee, the Chief Financial Officer; and Kim Clark, the Company Secretary, who are also in attendance. In line with the Corporations Act, our auditors, A D Danieli audit, are present and now represented by Sam Danieli. They will be available to take questions on the audit report later in the meeting, if so required. I will now go on to the Chairman's address. The 2021 financial year was another significant milestone for Urbanise as we completed the PICA rollout following the complete redevelopment of the Urbanise Strata platform. The rollout cements our long-term relationship with PICA, the largest strata manager in Australia. At the end of September 2021, our closing cash was $6.8 million with no material debt. This follows the capital raise completed a year ago with net proceeds received of $6.5 million. The strong financial position of the business allows us to continue to invest in the growth of both platforms. The purpose of the capital raise followed the decision to further invest in the Facilities Management business to take advantage of the sizable market opportunity across APAC and the Middle East. Our ability to drive growth in these markets has been strengthened by an increase in our sales and marketing resources over the past 12 months. We also welcomed Sam Cuccurullo as a Board member, who has been invaluable in helping us with the strategy of driving growth across Facilities Management. We are pleased with the progress so far with green shoots of sales conversions, validating the market opportunity. This includes securing contracts with Colliers in Australia and Nakheel in the Middle East, both are significant FM requirements. The Board is closely monitoring the buildup of the FM sales pipeline and there are good indications for growth. We recognize that there is still work to be done in the next few quarters to show meaningful growth in light of longer sales lead times in this market. In regard to strata, the completion of the PICA rollout frees resources to scale the strata markets in the Middle East and Australia. Our strata platform is well positioned, delivering legislative compliance to the sector and a unique integration with the FM platform. Finally, I will reiterate the statement I made at the full year. The mandate for Urbanise is clear to drive revenue growth so that the business achieved cash flow breakeven. The priority for the second half of FY 2022 is to convert the sales pipeline and reduce the current cash burn levels. We will continue to invest in product development to enhance existing solutions, expand a number of features and applications and develop new solutions. I would like to take this opportunity to thank our CEO, Saurabh Jain, and his team for their efforts and dedication throughout the year. We have made real progress in streamlining our core software business and delivering a product that is highly valuable to our customers. I would also like to thank the Board, our customers and you, our shareholders, for your support during the year. I look forward to working with the Board, Saurabh and his team as we continue to grow the business in 2022. I would now like to invite our CEO, Saurabh Jain to address the meeting and provide a business update.

Thank you very much, and good morning, ladies and gentlemen. I'd like to extend my welcome to today's AGM. I'd also like to thank our shareholders, Board members, staff and clients who made 2021 another exciting year for Urbanise. As the COVID pandemic continues, our team has continued to operate remotely. However, in some regions, our staff has started to visit customers and work from our offices. While we are missing our overseas colleagues, there has been no material business impact from COVID, and we hope to start traveling next year to see our colleagues and customers face-to-face. The financial highlights of our FY 2021 results include strong ARR and revenue growth as our business continues to scale. I'm pleased to report that across the year, the demand for our platform is evident with our recurring revenue base, increasing by 28% to $10.44 million at June 2022. Total revenue was up 19%, driven by a 16% increase in recurring license revenue and a 35% increase in professional fees. Strata revenue increased by 19%, driven by the PICA rollout. FM revenue increased by 21% despite the loss of a legacy Middle East customer, which was more than offset by new customer growth. Our year-end backlog of $1 million included around $760,000 for the Nakheel project secured in February, which was allocated across both platforms. I'm pleased to report we were able to complete the rollout of Nakheel during Q1 FY 2022. As Almero mentioned earlier, in November, we undertook a $6.5 million capital raise, which was well supported by new and existing shareholders. The purpose of this capital raise was to invest in sales and marketing to accelerate facilities management revenue growth. At the end of June, our cash position of $7.8 million and -- $7.8 million reflects our disciplined approach to expense and working capital management. Now turning to the slide on the Q1 results. Our progress during Q1 FY 2022 shows total revenue growth period on period was 15% with a 29% increase in license revenue on the previous corresponding period. We recognized a full quarter impact of the PICA license fees and successfully converted backlog revenue for the Nakheel contract. We also announced a FM contract with the Australian arm of a global leading commercial real estate company. Work has commenced on that contract and will require development over 12 months before transitioning to a license fee arrangement. The average monthly cash used during Q1 was $334,000, reflecting the expansion of our sales and marketing team, particularly in FM, to accelerate growth and reinforce our product leadership. The closing cash balance at the end of September was $6.8 million, giving us sufficient cash runway to execute on our growth strategy across both platforms. Turning to the slide on our solutions. The Urbanise platform -- sorry, next slide, the Urbanise platform delivers comprehensive solutions to the strata management and facilities management sectors. We have a deep pedigree in strata and facilities management operations. This supports the way we design our platform and our general approach to development. We are uniquely positioned to offer both strata and facilities management in an integrated approach. Our implementations have sped up with our configurable approach and provide world-class support in trading, which helps us achieve near minimal churn. Turning to the slide of facilities management market opportunity. The opportunity for facilities management is sizable. Our addressable market is determined by the estimated spend by facilities managers in our regions. Facilities managers and their customers are demanding the technology, and we are in a position to help them with our cloud offering. We will continue to leverage our experience in sectors that we have already secured, such as mining, utilities, aged care and education. Strata market opportunities, turning to the next slide. The opportunity for strata is supported by a number of encouraging trends in the strata market, including consolidation driven by large strata managers with the potential reduction on our cost to -- of customer acquisition, and as our product is rolled out across business acquisitions made by our customers. Urbanise is able to offer a unique integrated strata facilities platform, which has allowed us to dominate the Middle East market. This trend is permeating the Australian market, which we're uniquely positioned to capitalize on. On to the next slide, so 3 years of continued ARR growth. These market opportunities have supported the past 3 years of continued ARR growth across both platforms. The ARR has increased by 133% or $6 million since 2018. Looking forward to the year ahead, we are focused on driving top line growth. We'll continue to push the combined strata and the facilities offering in the Middle East, where there's an immediate demand. In Australia, we'll focus our strata offerings on the medium to large strata managers, who are leading the industry trend. New facilities management sales will be focused on our core market of Tier 2 FM outsources as well as asset owners where we have deep experience, such as mining, utilities, education and aged care. This sales drive will be supported by our investment in sales and marketing. We expect the FM network effect will continue as our FM outsourcer customers continue to seek new work and mandate their subcontractors use our platform. New strata sales will leverage our leading cloud platform that we have heavily invested and -- invested to rebuild over the past 5 years. Now that the PICA rollout is complete, we can focus on sweeping up as much as the strata market as possible. I would like to take this opportunity to thank the Urbanise team for their efforts and dedication throughout the year. Without our team, we will not be able to deliver any of the fantastic solutions to our customers. I'd also like to thank the Board, our customers, our shareholders and to all Urbanise stakeholders for their support during this year. I look forward to working with our team and customers as we continue to grow the business in 2022.

Thank you, Saurabh. Have we received any questions from shareholders?

Yes, we have. We have a number of questions from Gary Bogden, and I'll read them one by one, and we'll answer them one by one. So the first question is, despite the strata platform contributing over 63% of the company's total revenue, why is there no strata expertise on the Board and at senior management level? And what is Board proposing to do to address this?

Thanks for that question, Simon. So there's considerable state expertise within the urbanized management team. We gather a lot of marketing expertise from our clients and our markets of APAC and MENA. And we also periodically review the skill sets of the Board and management against the needs of Urbanise. At this stage, we feel that the Board is comfortable with the present group skill set.

Second question. Based on the past performance of the company, in particular, the performance of the company's share price, including its decline over the last month or so, what are the specific performance metrics that entitles the CEO to be granted performance shares?

So the CEO's targets are focused specifically on revenue, on ARR or recurring revenue and then also on cash in line with shareholder value. Divesting of the shares ensures long-term shareholder alignment. So we feel that the CEO's KPIs are very much focused on things that could drive shareholder value in both the medium and the long term.

Question 3. The Board may be aware that the competitive landscape in strata has changed over the past 3 or 4 years. There are 2 new entrants into the market in smarter and stratify. Macquarie Bank is investing a significant amount of time and money on a new platform. Rockend has been acquired by a global property tech company. And StrataMax has recently partnered with ResVu, a leading community platform. With this in mind, what is the Board's and management's strategy to deal with this competitive landscape?

Simon, I will hand that question Saurabh to answer.

Yes. Thank you, Almero. Well, I think you're absolutely correct. It's a very competitive landscape as it always is. Despite the competitiveness like we've been able to show some very impressive growth on the strata side, the key thing to remember is we're still the only cloud strata platform of any scale in the markets we operate. But as with any time like you can't list for the rest of your models. We're always going to be innovating and investing in our platform to make sure we stay ahead of our competitors.

Thanks, Saurabh. Please confirm whether the Board intends to further raise funds this financial year or next -- I'm sorry, and are focused on getting to breakeven? I'll be happy to take this one or you can take this one?

I'm happy to take this one. We're not intending to raise more capital. We are intending to get to cash flow breakeven by growth and by improving the working capital in the business.

Question 5. Now that PICA is on board, what progress is being made on other large strata management companies in Australia, such as Smarter Communities, Whittles, Netstrata?

I think, Saurabh, if you can take this one.

Yes, absolutely. Look, I mean, we've got some very talented and focused sales efforts on all the strata players, I mean not just here in Australia but also in the Middle East.

Next question. We understand Urbanise was one of a number of strata companies -- strata technology companies participating in a tender with Bright & Duggan, but was unsuccessful. As the only advanced cloud platform in the industry, why was this?

Saurabh, can you take this one?

Yes, yes, absolutely. Look, I mean, we don't say that Bright & Duggan have other priorities in their business. We haven't rolled out kind of and are focusing on them and targeting them in the future. I think at the right time, I'm sure we'll reengage with them.

Question 7. The company's recent capital raise of $6.5 million was used to fund the FM platform and the sales and marketing activities for that system. This was a message to the shareholders and the market that Urbanise is only focused on FM. With FM revenue growing 6% last year, is this justified?

Saurabh, do you want to take this one?

Yes, yes, absolutely. Look, I mean, Urbanise is very much focused on both our platform FM and strata, especially given the growth we had from strata with PICA and all bunch of other new contracts in the last year. You have to really consider each market separately from the sales and marketing perspective because we have such a technical need in strata being the only advanced platform of any scale in Australia, we actually don't need a large cost of acquisitions. We don't need a large sales and marketing team, although we do actually believe that we'll naturally pick up all the major companies over the next number of years. Where is that kind of a bit different? I mean the town is much, much larger, and that's why we're able to kind of really push and accelerate the growth there, and that's why we're investing the sales and marketing effort on the FM side.

Question 8. The average recurring revenue or ARR per lot for strata has decreased from 2018 to $10 per lot in '21, which represents a 38% reduction. Why is this?

Saurabh, do you want to take this one?

Yes, yes, completely. So well that actually is explained by our largest customer PICA where we had particular arrangements on their rates. One thing to keep in mind with PICA though is we have a very different cost for the support. So they do a lot of the first level support, so there is actually a lower cost for us. And because of the scale and the nature of the historical deal, they do have a better rate than other customers.

Thanks, Saurabh.

Nine. In the annual report, your -- you state sales of strata will be driven by upselling of additional services. What does this mean? What are these services? And how do you propose to achieve this?

Another one for you, I think, Saurabh?

Yes, yes. Actually -- so I mean the fundamental focus here is how do we drive up the ARPU across our customer base. So what we have been focused on the additional services such as printing, we did strata printing a little while ago. We've done invoice data entry. We very recently introduced like a Zoom Star Live strata printing as well. So we have a dedicated customer success manager that works with our existing customers to see -- to upsell this whenever we can because the fundamental theory we're trying to do is want to be able to offer our strata managers all their techniques either through our platforms directly or through partners that we get into our system.

Thanks. Simon?

How many strata clients in Australia are using the full feature set of the FM platform? And is PICA using the FM platform after confirming them with many years ago in market releases?

Saurabh, do you want to take this one?

Yes, yes. Look, in MENA, we've had some great results, such as the [indiscernible] by selling both the combined strata and FM platform. The horizontal integration of strata at Urbanise really just started here in Australia. So currently there are not many customers in Australia that use the full feature set of the FM platform. PICA really focused on the strata platform after a large, major go-live in June this year. Right now, we're really focused on onboarding some of the acquisitions. I'm sure you would have seen in the media some of the acquisitions we've done down in Tasmania, done up in the Northern Territory. At the time they've signed the contract with PICA, there were a number of options for additional Urbanise services such as FM, IoT, invoice processing and bureau services. Urbanise is focused on delivering the strata platform for PICA and as [indiscernible] disclosed as part of our backlog and really the focus was on converting that to [ strata ].

Okay. Is there another question, Simon?

Yes. The revenue in South Africa went backwards last financial year. And we note that there is still some revenue being attributed to the utility platform. What is the strategy with South Africa?

So I mean Urbanise is a global company with customers in APAC, in the Middle East, in South Africa, and it's really utilizing the presence in those markets to operate its shared services from a global perspective. So the company is not so much focused on new sales in South Africa nor the legacy utility platform. But it still has a significant presence in South Africa from a staff perspective, which is a reasonably low cost space for the company to operate from. And so it justifies a strong presence, I mean South Africa from which has been also service customers in the same time zone in South Africa, especially in the Middle East.

So the final question from Gary Bogden is, with the Nakheel deal, how long is it expected to take before the reported $760,000 in ARR is fully realized. And what's the annual revenue per lot of this deal?

Saurabh, do you want to take that one?

Yes, yes, absolutely. So I mean the project went live kind of partway through Q1 across 2 phases, FM and strata separately. So we really expect the full financial impact of that in Q2. And look, we don't have to disclose the revenue per lot for those kinds of deals.

Thanks. Simon, are there any other questions from shareholders?

Not at this stage.

Thank you. We will then now proceed with consideration of the financial and other reports followed by the formal resolutions. And as is customary, there will be time to consider shareholder questions at the end as well. I will now open the voting on all resolutions. We will now proceed with a discussion on the proposed resolutions, including questions from shareholders about each resolution. The notice of meeting was dispatched to all shareholders. I propose that with your agreement, the notice of meeting be taken as read. Shareholders who wish to inspect Urbanise.com register may contact our share registry, Boardroom Pty Limited. As I propose each resolution, the screen will reflect the total number of ballot proxies for that item and the manner in which they have been directed. These figures will be as at the closing time of receipt of proxies, which was 3:00 p.m. AEDT on 22 November 2021. These figures may be varied if a shareholder who submitted the proxy is attending the meeting and has revoked the proxy. We will now proceed with the business of the meeting. Item 1 on the agenda deals with the receipt and consideration of the financial report, the directors' report and the auditor's report for the year ended 30 June 2021. No shareholder vote is required in relation to this item of business. However, shareholders now have the opportunity to ask questions or have discussion on these matters. Urbanise.com's financial report, directors' report and auditor's report for the year ending 30 June 2021 are incorporated in the 2021 Annual Report, which has been sent to all shareholders who have requested the report. I would encourage any shareholder who has a question on these reports or on our business in general to raise them now. This is also the appropriate time to raise any questions you may have to the auditor, which are relevant to the conduct of the audit and the preparation and content of the audit report. Have we received any written questions in respect of this item of business?

No, we haven't.

If there are no further questions, I would now like to move to consider the formal motions of the meeting. I refer you to Resolution 1 of the notice of meeting in respect of the approval of the remuneration report of the company. This is a nonbinding resolution. The company's remuneration report is contained in the 2021 Annual Report and is also available on Urbanise.com's website. The screen shows proxies received for and against for this resolution and at the proxy's discretion, including me as Chairman to vote in accordance with my stated voting intention in favor of the resolution. I would highlight that in accordance with the Corporations Act, no votes may be cast on this resolution by or on behalf of a member of the company's key management personnel or their closely related parties. I will refer to these people collectively from now on as prohibited voters. A prohibited voter may vote directed proxies where they do so for another person who is not themselves a prohibited voter. As Chairman, I may also vote undirected proxies for a person that is not a prohibited voter in accordance with my stated voting intention to vote all available proxies in favor of this resolution. For the purposes of this resolution, a prohibited voter includes a member of the key management personnel named in the remuneration report. Before opening this to discussion, I would like to mention that in the interest of corporate governance, the Urbanise.com Board have abstained from making a recommendation in relation to this resolution. Simon, have we received any written questions in respect to this item of business?

We have not.

If there's no further discussion, I propose the resolution that the company adopt the remuneration report for the year ended 30 June 2021 in accordance with Section 250R2 of the Corporations Act. Please submit your votes in respect of this resolution. [Voting]

I now refer you to Resolution 2 of the notice of meeting in respect of the reelection of Mr. Pierre Goosen as a Director of the company. Mr. Goosen retires in accordance with rule 6.7 of the Company's Constitution and Listing Rule 14.5. Mr. Goosen's biography is included within the explanatory memorandum accompanying the notice of meeting. The screen shows proxies received for and against for this resolution and at the proxy's discretion, including to the Chairman to vote in favor of the resolution. The Urbanise.com board, with Mr. Goosen abstaining, unanimously recommends that you vote in favor of this resolution to approve the election of Mr. Goosen as a Director of the company. Simon, have you received any written questions in respect of this item of business?

No, we have not.

If there's no further discussion, I now propose the resolution that Mr. Pierre Goosen, who is retiring in accordance with the constitution and Listing Rule 14.5 and who offers himself for reelection, is reelected as a Director of the company. Please submit your votes in respect of this resolution. [Voting]

I now refer you to Resolution 3 of the notice of meeting in respect of the reelection of Mr. Tod McGrouther as a Director of the company. Mr. McGrouther retires in accordance with rule 6.7 of the Company's Constitution and Listing Rule 14.5. Most of McGrouther's biography is included within the explanatory memorandum accompanying the notice of meeting. The screen shows proxies received for and against for this resolution and at the proxy's discretion, including to the Chairman to vote in favor of the resolution. The Urbanise.com Board, with Mr. McGrouther abstaining, unanimously recommends that you vote in favor of this resolution to approve the election of Mr. McGrouther as a Director of the company. Simon, have we received any written questions in respect of this item of business?

No, we have not.

If there's no further discussion, I now propose the resolution that Mr. Tod McGrouther who is retiring in accordance with the constitution and Listing Rule 14.5, and who offers himself for reelection, is reelected as a Director of the company. Please submit your votes in respect of this resolution. [Voting]

I refer you to Resolution 4 of the notice of meeting in respect of the approval of the 10% placement facility. The terms and details of the allotment of these shares are contained within the explanatory memorandum accompanying the notice of meeting. The screen shows proxies received for and against for this resolution and at the proxy's discretion, including to the Chairman to vote in favor of the resolution. The Urbanise.com board unanimously recommends that you vote in favor of this resolution. Simon, have we received any written questions in respect of this item of business? Sorry, Simon?

No, we haven't.

Thank you. If there's no further discussion, I now propose the resolution that pursuant to and in accordance with ASX Listing Rule 7.1A and for all other purposes, shareholders approve the company having additional capacity to issue equity shares, securities up to 10% of the issued capital of the company at the time of issue, calculated in accordance with the formula prescribed in ASX Listing Rule 7.1A.2 over a 12-month period from the date of the Annual General Meeting at a price no less than that determined pursuant to Listing Rule 7.1A.3 and otherwise on the terms and conditions in the explanatory memorandum. Please submit your votes in respect of this resolution. [Voting]

I now refer you to Resolution 5 of the notice of meeting in respect of the approval of the issue of performance rights to Director Saurabh Jain. The terms and details of the allotment of these shares are contained within explanatory memorandum accompanying the notice of meeting. The screen shows proxies received for and against for this resolution and at the proxy's discretion, including to the Chairman to vote in favor of the resolution. In the interest of good governance, the Urbanise.com board abstains from making a recommendation in respect of this resolution. Simon, have we received any written questions in respect to this item of business?

No.

Are there any further questions from shareholders on this item of business?

No.

I then propose the resolution that pursuant to Section 2081A of the Corporations Act and Listing Rule 10.14, the members of the company approve the granting of 109,281 performance rights to Mr. Saurabh Jain, Executive Director or his nominee, under the company's equity incentive plan and on the terms outlined in explanatory memorandum. Please submit your votes in respect of this resolution. Ladies and gentlemen, please ensure that you have cast your vote on all resolutions. I will now pause you to allow time for you to finalize those votes. [Voting]

Okay. Voting is now closed. We will publish the final voting results with the ASX and on our website. That now concludes the full part of the Urbanise.com Annual General Meeting. We invite questions for a final time. Simon, have we received any further reference questions?

No, we haven't.

Okay. If there's no further questions from shareholders, I then -- this now concludes the Annual General Meeting for 2021. I thank you all for your attendance and call the meeting to a close.