Vection Technologies Limited (VR1) Earnings Call Transcript & Summary

Welcome to the Vection Technologies Investor Webinar. I'm Alexandra Khan, I'm part of the media relations team. And today, I'm joined by Mr. Gianmarco Biagi, CEO and Managing Director. Welcome to you, Gianmarco.

Thank you, Alexandra.

Now as many of you know, Vection Technologies is an enterprise-focused company that helps businesses solve real-world problems in the digital world. The company helps organizations leverage their 3D data via powerful Spatial Computing and AI interfaces that foster collaboration, learning and workflows that grow sales, leverage efficiencies and more. The company over the last 5 years have seen enormous growth since its inception with a positive net operating cash flow continuing to emerge and recurring revenue now representing 35% of total revenue, which is up 60% on the prior year. In terms of some housekeeping, today will be followed by a Q&A session. So if you'd like to ask a question, please use the question mark box at the bottom -- in the bottom ribbon of this webinar, and I will get to it at the end of the session. If we don't get to your question, please know that we will follow up with an e-mail to address it within the coming days. With that said, Gianmarco, I'll hand over to you.

Thank you. Thank you, Alexandra, and thank you, everyone. Now I will start with a general overview of the company. Vection is a technological company. And in just 5 years, we have developed a global presence and office in our part of the world. We are present in Italy with research and development, in United States, Emirates and Australia. We are a software and producer and our products include our property software and hardware that we developed plus some hardware solution. We have 200 people in staff and 100 roughly big clients globally, serving only medium and large enterprise only Tier 1 for the major part. Last financial year, we had AUD 34 million and operate in a very big addressable market, which according to Respect Source is expected to grow almost to $2 trillion in the 2030. We have a strong history on M&A completing 6 acquisitions on our history, acquisition for a technological development and territorial presence. Our vision is to be a leader in a combined fashion computing and artificial intelligence to drive a greater business benefit. The world is living a real revolution where AI and Spatial Computing are impacting and will impact continue to more and more on the people live and therefore in the company. Vection is ready to take this advantage. Just in the past 4 SAP has done in the ERP trend. SolidWorks in the CAD of trend, Salesforce for MRP and the 4 tech giants in Internet trend. And today, this company are billion and billion in revenues. Our value proposition is our property products suite is vast, can be grouped into core and our area, artificial intelligence and spatial computing. When I speak about spatial computing means VR, AR, MR and hardware designed for a medium to large enterprise and public sector organizations. Our strategy is AI driven, but our integrated modern ecosystem is unique because it's combined AI and uses spatial computing creates a tremendous benefit for our clients, benefit that cannot be achieved through stand-alone technologies. About AI, we offer a generative workflow automation, 3D avatar, documents processing, business intelligence and real-time decision-making cater for reducing costs and increase sales for our clients. These tools has accelerate application make. [Technical Difficulty]

It looks like Mr. Biagi just lost Internet connection. We'll get him reconnected shortly. So appreciate patience, just while he jumps back in. Just while he's joining. Appreciate, it looks like he's reconnecting. I'm getting confirmation that he's going to be here shortly. While we wait for him to join, I appreciate all of the questions that are starting to come through. Now's the good time to ask any of those that you may want to ask. And here we are. You are back on.

Excuse me, but they have a small problem with the connection, excuse me.

Not a problem.

Just a second. Okay. I spoke about the AI front. Generative work of automation we can offer for our clients, 3D avatar, document processing, business intelligence and real-time decision-making. Why? Because in this way, they have a possibility to reduce the cost, increase the sales or the process. These tools is -- help business acceleration, operation makes sense for a complete data automation, for instance, the automated demand a task and transform the caster interaction. Spatial computing is about merging the digital and physical world. We're talking about immersive training, collaborative 3D design, digital twin, virtual showroom and augmented virtual experience. Total of this, our ecosystem allow user to design, training and communicating in real time within a digital environment, measure and analyze everything that's happened within that. In general, the AI market is expecting to surpass USD 1 trillion by 2030, while spatial computing is projected to reach USD 800 billion, both growth, roughly 20% every year. With our global presence, property technology and real commercial traction in the experience base, Vection is perfectly positioned to be part of the multitrillion dollar market directly on through and commercial partners and generate large scale value for our shareholders. Take this formula, in [ immersive, ] we now have a robust pipeline of the order and ongoing costs roughly in $35 million and closed the first half of the year with excellent growth compared to previous year and strong operating results. With circa 35% of recurrent revenue and the mix offering include SaaS solution, professional service, hardware and IT integration, we provide a unique and complete service for our clients, capitalizing on a global megatrend powered by AI. The combination of our platform represents an integrated solution for our customers for all business areas, marketing, research and development, operations, training, sales, pre and after sales. Our application are too vast to discuss in this forum, but I wish to highlight a key point of difference for Vection today. Our property integration platform allows our customer a single point of access to all property application and give the ability to combine is the cross-sell and application, which no competitor to -- our competitor can do, believe me. Price logo. We -- you can see our main clients and our trusted partner of a global customer base, only Tier 1 and professional clients, plus public administration across a broad range of industry as well as we have no client concentration. It's very important for the company. The partnerships are absolutely very important. Over many years, we have become a deeply integrated leader software and hardware names. You can see the slide, which includes the 3D environment, such Unreal and Meta and other technological leader like Microsoft, Dell Technologies and Xerox. That relationship not only value to our capability, but significantly expand to our go-to-market footprint. It's mandatory.

Fantastic. Gianmarco, can you give us a bit more color on what problems you solve with some of these clients and through some case studies?

Yes. Yes. Thank you. Thank you, Alexandra. Yes, we have an incredible number of an example. But at the beginning, it's very important to understand that we are offering in 10 different industrial sector from government, defense, transportation, health care, retail, fashion, and we have a lot of case study. Let me start with an example for food and beverage clients, a big name is Nestle. It's a worldwide company. What's the problem? The physical showroom are very expensive. And then to test -- optimize new product -- when they want to optimize new products, the placement within retail and to work with them to create a complete VR retail store to run detailed shopper analysis. Our software can track user movement and even they look on the shelf. And through this, the client increased sales and reducing the time of the cost, about 30%. Another example, in the insurance world Generali is a big corporation in this field, such as creating a relisting disaster training environment, help staff be trained and across a range of scenarios, and it's something is very difficult to provide staff with otherwise. We give confidence to the customer about their disaster response and insurance premise can be reduced. The benefit in the -- is that the people are trained in a realistic way in case of disaster, eliminating risk and with a strong cost reduction. Mirvac, another example, we assist them in the selling of the planned property in international investors a part of $2 billion Sydney development by creating high-resolution through on the property where a property agent was able to meet them and the digital property address to drive higher engagement and sales results. We help them sell apartment of the planned buy globally and only walk through their property in the digital world. The advantage has been in terms of sales increase the opportunity and significantly reducing the time of decision for the customer. Another example for a large client of Accenture, oil and gas work, we develop an AI plus VR platform for the classroom training for the maintenance operators. After the training and only after the training when they are ready, they can go in, in field with AI and AR with visible operational extraction in front of them and to assist and correct the works. Thanks to this, cost, time to risk and errors has been reduced roughly 40%. I conclude this part talking about a many application of generative AI from the retail were where shops and another activity in the retail where the virtual assistant are available 24/7 speaking my language. The date analysis platform generates very useful information for all employees and the management and analysis of contracts and work construction, for instance, take place in a very short time. All of this reduced the fix of cost and increase the customer service. This is a general overview of the case history that we did. Speak about the building momentum. The fiscal year is a year for growth, but also business consolidated for us. Recently, we're completing the acquisition of the digital box, which included requested subsidiary to develop AI software. We delivered 60% revenue growth in the first half, $70 million in H1 in the first half pro forma without pipeline, around $35 million in negotiation today and coming into the new fiscal year. Importantly, 34% of our revenues is now recurring. That's over 200% big growth compared to last year, showing traction in the platform-based offering. And on the bottom line, we achieved a big improvement in the EBITDA in the first half, 50 positive EBITDA with a positive $55,000, then less $4.2 million in the last year, with operating cash flow positive for $2.3 million in this quarter -- in the last quarter. It's clear it's a very big signal of our business, not only -- is not only growing, but becoming scalable and profitable. The financial performance, historical, we have a record steady growth in revenue every year since we were listed on the 6 -- just 5 years ago. It's an exciting time for us breaking even and adjusted EBITDA base. In the first half, we delivered $70 million pro forma revenue within 34% recurring revenue, what I told, and positive adjusted EBITDA. Our blended gross profit margin is roughly 35%, 45%. And currently, of the total revenue, it's up to 60% year-to-year. With our fixed cost base, $70 million, we are now a point of operational leverage, then we can see the EBITDA, the operating cash flow start to emerge. About the acquisition is absolutely part of our strategy, and we have -- I personally have a strong background in M&A and during Vection history, we have completed 6 acquisitions, which have helped us gain geographical presence and as well as tech and sales capability. We now have a full set of intellectual property and are looking forward to earn an active acquisition only. Diversified business, in this slide. As you can see from the slide, as business is very diversified with no major industry product of service concentration, and it's a big leverage for us, is a big risk of the company. We have no major client concentration, retail, defense, health care are among the largest market for us. All of this is part of Board of Directors. In terms of our team, our Chairman, Marco Landi, is a strategic side from his time, he was a COO in Apple with a large, a big experience and international relationship to that. On the finance, our CFO, Virgilio Picca is -- he put a rigor with a background in a listed company, including experience in M&A and complex international operations. I'm the CEO, I have 20 years of experience in leading multinational company across the manufacturing and technological as well as in M&A. Jacopo Merli, COO and Lorenzo Biagi bring a deep technical advisory capability and are essential executive in our business. We are also well present in Australia with Cameron Petricevic and Bert Mondello, bringing the decades of Board advisory, M&A and capital market experience, particularly in ASX-listed company. The Board and executive team are fully aligned with the shareholders with 32% ownership held by my -- by me and my family, we are firmly invested in Vection for the long success there. What about corporate snapshot. Currently, our market capitalization is roughly $38 million, which is less by onetime for revenue and a big discount of trading peers. You could invest in our company by directly using equity capital via ASX called VR1. We think our stock is undiscovered today among ASX and ASX investor and is very cheap in this moment. Thank you, Alexandra. This is all on my part is I think that I give you the very high level overview of the company on the main point and the main focal point.

Fantastic and wonderful. Thank you so much for the presentation, Gianmarco. The questions have been coming through. There are quite a number that we can see that have come through. We just in terms of timing and being able to finish right on 3:30, I think we will start with some of the first ones, and let's see how we go. First one, Gianmarco for you is, congratulations on your announcement with Amazon. That appears to be very exciting. Can you tell us more?

Yes. Amazon is a big name and it's very recent collaboration with them, and we are very excited for this. It's the first level of the collaboration with Amazon. And today, we -- the collaboration started with Amazon about Argo is our AI platform, in particular, to help the disability employees. With the collaboration with Amazon, we have a possibility to start in Europe with a big diffusion of our platform. And the collaboration is that absolutely, we use the Amazon marketplace, but in addition to the promotion of Amazon and Salesforce. And we have a possibility to use their technology to develop our platform.

Yes. Excellent. I've got another 1 here, a similar line to collaborations. You work with very large global vendors. Can you tell us more about the relationship with Dell?

Dell is our historical partner through our branch, JMC. We are it's Italian partner, is a very important title because the collaboration with Dell in Europe now and in the future in all parts of the world is very important. We developed -- with this collaboration, we develop to them and hardware with hard AI software pre-installed. It's very important because for the clients -- that the clients have a possibility to acquire a very strong hardware with native included our technology, our software, AI and other platform and immediately, that will be integrated in the information system. This is very important for the client and for us because this alliance is absolutely granted for our growing in the future with our sales force and Dell sales force in Europe.

Excellent. Okay. Another question. This 1 relates to markets that you -- and sectors that you sell in. Why is the retail market so important to Vection?

Well, we have many strategic line that we are following. But in particular, the retail, what we mean that these were showroom, store, hotel, pharma, real estate, it will be very important because the impact of AI on this kind of market, it will be very important and we are ready to take it because we are producing -- we are a producer of kiosk, which included our AI virtual assistant. In this way, in every shop in the future, we have a possibility to have our kiosk with our virtual assistant. And for the clients, it will be very important to reduce that fixed cost. Our virtual assistant speak native -- much many languages, and they work 24/7 every day. And we are absolutely sure that the impact on the retail market will be huge, and Vection is ready with our property platform and hardware kiosks.

Fantastic. Just as you were speaking and addressing that question, we have just got a number of more questions coming through. I'm going to ask another 1 or 2. To everyone who has submitted questions, if we haven't gotten to, please be assured that we are capturing them all and we will respond via e-mail, so that your question will be answered. Gianmarco, can I now ask you a question about the recent U.S. sales and your collaboration with Xerox? What are the plans there?

Yes. The U.S. is an early, but important large market for Vection. We recently announced a contract, for instance, with Massachusetts Hospital. It's a very important hospital and as well as with the collaboration with Carrier, Xerox and ServiceNow Group. Our plan is to getting start, but we have a presence on the ground, a very large strategic partner. I can't say much more for now, but I can tell you that U.S. is a very important market for us and now we are working strong to close an important collaboration in that market to grow very quick in the next period.

Excellent. Can you explain how Vection is different to the other competitors in the market that are doing similar spatial computing and AI work?

Yes. Yes, very good question, very good question. Because it has quickly built a unique integrated system of AI plus spatial computing. We are a single endpoint of assets for our clients, tested and verificated on many professional clients and is ready to take on this global challenge with the platform of a mature system and a really efficient corporate structure present in the market. The market is ready and Vection is ready. This is the reason why we are different. We are ready with our AI plus XR ecosystem. Ready now. Thank you.

Fantastic. Well, I think that's all we've got time for today, getting the wrap up. So thank you all for joining this investor webinar. A copy of today's recording will be made available online, and we will distribute that, and we will also respond to any of the questions that have come through today. So thank you. And you all a good afternoon.

Thank you very much.

Thank you, Gianmarco.

Thank you.