VNV Global AB (publ) (VNV) Earnings Call Transcript & Summary

Thank you very much, Björn, for -- let's start. Hi, everyone. Good to have you here. It's the fourth day on our Capital Markets Week, and we're super, super happy to have Dave Waiser here. So Dave -- we know Dave for a long time now, so it's -- and it's a particular pleasure to have Dave present Gett, where we've been around since 2014, I think. And so time flies, and -- but we're super excited about this portfolio investment of ours. And like the previous days, we will have -- Dave will do a presentation of Gett. And then after that, we'll open up for questions. [Operator Instructions]. Good. Without further ado, thank you, Dave, for joining us.

Pleasure. Pleasure. So let me take you through where the business is today and what is taking us forward. Just a quick reminder, yes, this is a B2B business. More than 85% of our revenues come from B2B. It's a category we created in 2010. We made our very first ride with Google and Disney back in 2010. And since then, we have more than 1/3 of Fortune 500 companies using Gett. Being B2B company for more than 10 years, it means that we built an infrastructure to support the portfolio of companies we have, including strong sales and support organization and that experience enable us to keep signing and winning of about 500 new corporate clients every month. Some of the good names, a few names that -- who obviously are all familiar or trust Gett, the corporate ground transportation in the locations where we have service today. Interestingly, when we look back, and we analyze what is the most important KPI in a B2B SaaS service, that would be the net dollar revenue retention. And when we look back and look in the cohorts of our clients, we're actually pleased to see that the retention -- net dollar retention is 130%. And it's actually stayed flat this way, even after the first year and second and third. Just as a quick with reference, what is known in the public B2B SaaS companies, the net dollar revenue retention stands for 126%. So we feel pretty good where we are today. And obviously, we expect to increase this number with the product that we are launching across our territories, and we'll speak most of the time today about this. We also see our customers being happy. That net dollar retention tells us that they must be happy to stay with us and actually contribute more revenues year-over-year. But we also find that we save, on average, about 25% in the ground transportation spend after they install our software. Some of the clients even report 44%, but that's more of the outlier and indeed, an average is 25%. But this is a good example of some large customer being more than 340,000 employees, and we generated 44% in our first trial. We understand the Gett corporate solution. We need to look both into experience that we generate for the employer and employees. I would like about the service we provide today that we established comprehensive and robust corporate solution from one hand. And from the other, we deliver best-in-class mobile experience. Or as we like to call it, consumer-grade type of experience in enterprise, which is today a key when you have a solid corporate platform, combined with a great user experience. I believe that up to now, I did not share much new to you and last year, we been discussing exactly the differentiated strategy that Gett follows. Being the leader and following the corporate segment. But today, I want to speak about the most important thing we ever developed and something that we developed in the last 3 years and launched in the recent times, and this is the most important and fascinating announcement. So what is generation 10? Obviously, it's our tenth-generation B2B, and it has all the knowledge and value we generated until now. But we also ask ourselves what if we're able to develop a technology that can connect to third-party supply, not exactly our own supply, but nonnative supply. And by connecting in a way that it becomes seamless for the corporate user, and if we succeed in making this, we will be able to help companies to aggregate all of the best ground transportation options in one single platform. And that's what we've been after in recent years. Just to give you a perspective, the global corporate market spend is $1.4 trillion a year. That's how much the company is spending. But until now, there was no solution that can cover all of the footprint to provide them one platform that actually does it for all. To understand the problem that companies are facing today is that any global company has usually about 2 vendors in every major city and then few supplemental and they end up having more than 100 different vendors. That's pretty much how the map look like now. So if you're any global company, you can check with your procurement this is the map of all different ground transportation vendors. Some of them are familiar there from tech, and there are thousands, you don't know or might be not that familiar and they have limited technology or no technology. And yet they serve those global corporations. Eventually, they are the ones who provide service for $1.4 trillion a year. So you need to connect to all of them and you need to work separately with each and everyone, means you need to go for the integration, security, privacy, use of definition, project allocation, addresses, payments and many, many other things. And all of that should be done manually and each in different system. So that's the reality of today. This is what gen 10 does, we enable and organize all of the ground transportation vendors on one single platform. And we enable access to all of them in maintenance through one cloud platform. As a result, you can compare the prices, though before you had multiple vendors, you couldn't even compare the prices. You can control your spendings, fraud prevention, user management, project allocations, travel budget policies and so on and so far. And everything, it goes from one system, one interface. And obviously, you have one unified invoice, you don't need to run your own back office. This is the situation of today. Most of the companies have more than 100 people in IT just to do this. Easy way to compare what we do is, I like to say that there are hundreds of British Airlines, and there is only -- and there is Amadeus. There are thousands of different fleets and ground transportation vendors and there is Gett. Again, this is how the system look like, obviously, web and mobile. This cloud solution, so you have an access from anywhere. And it offers the best ground travel providers in one platform. So you can focus on what you do best. Our mission is to organize all the best ground transportation vendors in one single platform. Again, this is the unique solution that company -- the only solution practically that the company might need to serve their needs. Obviously, it's not simple, and that's what took us about 10 years of experience to build the whole tech across the spectrum. We just touched about it, and we reviewed the B2B brain, the one to maintain all the travel policy pricing and management and mobile solutions as well, but there are also back office technology that actually enable that magic I described in the beginning that we found a way how to connect to nonnative supply, means we don't run the supply and we don't have operation, we just connect to third party. And the reason -- and that the technology is very unique because eventually, you use the system like if it was the native marketplace or native supply. Again, very unique, and we [ humbled ] actually to accomplish this technology development. Once it's done, the service we're able to provide today beyond our native marketplace is that we aggregate and offer all of the options on one single platform. Also, the reason why the partners are signing contract with us because the market understand that Gett is not a ride-hailing company. Gett is not competing with other ride-hailing companies. But we rather partner with them, and it's a win-win operation. We focus on B2B. We have a large portfolio of clients once we connect, we give them a lot of value. And it's a win-win partnership. And they are not afraid to partnership with us as we only have one aspiration, is to bring our corporate clients better coverage and we bring them high-value rides at no cost. The supply coverage is how it looked like. We keep adding many every quarter. We expect to be in a 50% world coverage in supply during next year. And importantly, we already have a full national coverage in U.K., U.S. and most international airports. This is important. We just shared the vision, and it's obviously ambitious vision. Where Gett software might help and dodge each and every business around the globe. But the beauty is that when you try the solution today in U.K., it already works as a charm, and it's the only solution that actually offer you the entire range and a variety of vendors available in the country on the national scale in one platform. All of our new contracts in U.K. goes through the new platform and any global or local customer can experience that live. The market I mentioned is as big as $1.4 trillion. And though we expect to be somewhere around 50% supply coverage next year, the commercial sales will be still at the 35% of coverage. The reason for that is it takes time and lag. After we sign enough critical mass of supply vendors, the commercial cells starts only then. And hence, it's always has some lag. So in '21, our expectation is to be in 50% coverage, technical coverage, but sales and service of around 35% globally. Just to remind you, U.S., U.K. alone is 25%, is where we are today. Plus international airports, so it's very close to the [ bow ], which is already almost achieved. Some financials. I know that there's a lot of negative sentiment in the travel and ground transportation. And we're especially proud that we maintain discipline with our financials across last 5 years. Every year, we present -- we've been happy to share the progress and the company has been improving year-over-year its financial profile, up to the point that -- and as promised in our last meeting, we reached operational profitability in last December, it was still a goal when we presented last time, but we reached that goal exactly in December. It was the first time company generated operational profit. And since then, we keep growing and what is interesting is that even during the COVID and now times, we actually managed to meet our original budget -- original pre-COVID budget and keep improving in profitability. So since December, when we first reached operational profit as you can see here, we actually in June, broke our first record during the COVID times, actually meeting the budget and exceeding our past record. So we are on track year-on-year to continue to improve our financial performance. And we outlook the new records for the next session that we'll have next year. For the clarity, our operational profit is the consolidated EBITDA. When we look across all of our markets, each market has its own P&L, all consolidated P&L EBITDA is positive today, that excludes R&D. When we look on the right side, since our R&D costs are flat, you can learn that we expect to be already fully profitable early next year. With that in mind, I think we can pause here and take questions.

Okay. Thank you, Dave. It's a good overview. And I think we'll start with a question from Björn here.

Yes, sure. [Operator Instructions] But just to start, could you elaborate a bit on how you sign up all these third-party supply? And if that's a challenge or are you very happy to be integrated in your platform? And are there challenges in the integration as well?

Yes. It's a critical question. When we had this ambitious vision 3 years ago, to develop technology and sign third-party suppliers around the world. That was the very key question. Would it be possible? Would they be willing to join the platform? I'm happy to report that today we have more than 100 different vendors join the system, so the short answer is yes. The long answer is that, as I said, the reason why we are the only company who managed to sign external supply is because the -- Gett is not ride-hailing company, and those partners don't see us as a ride-hailing company, and they see us not as a competitor, but rather partner. I believe should we be any other ride-hailing company, you name it, some good names you can mention, I think they will have a difficulty to sign such partners since everyone will see them as a competitor. Different with Gett. By the time we sign a partnership, we immediately generate value for those partners by driving traffic from our portfolio of corporate clients and other benefit of Gett, very unique one. And we immediately generate value for our partners, and it become a win-win partnership. So we believed in that, but it was the biggest risk for us when we developed the generation 10, and I'm happy that we're now presenting something that's been accomplished and validated by the market.

All right. And a follow-up on that, I guess, will you elaborate a bit on how much of rides on platform today is native supply versus third party. And then if you look a year or 1.5 years out, where would you think that mix will be?

Right. So we'll be happy to report it in a way that our nonnative supply revenues rides are growing by a factor of 4 year-over-year. Actually, the first time we launched our gen 10 technology in a low volume just 3 years ago in '18. And then since then, it's been growing in production, commercial acceptance. And since '18, we've been growing by the factor of 4, 5x, including this year, COVID year, where our nonnative grew by 4x compared to '19.

And I guess, another question about -- in the past also is how -- if you could elaborate a bit on how the revenue -- what type of revenue and how that has evolved from more transaction-based revenue that we've crossed in the past to software-as-a-service type of revenue.

Yes. I believe it's a public event, so I will be careful answering your question. What is interesting is that when we look at our existing revenues, that are, by the way, also growing even in this COVID year, I mentioned in the beginning, we met our budget, pre-COVID version of the budget, and we actually slightly overperformed. It means that the underlying business lines, both the existing B2B and the gen 10 B2B are both growing. What we like about our transactional B2B, though the revenues are not based on subscriptions, those are transaction revenues, their nature. The behavior of those revenues is exactly as subscription SaaS type. Actually, the numbers I shared with you coming from our existing business. And 130% net dollar retention across several years, shows you that the predictability and stability, which we saw like in subscription is well maintained already in our existing platforms, I brought the reference of 126% average being a good metric for the best SaaS companies. So as of now, we are doing 130%, so at best -- at the level of the best SaaS companies. So the performance and behavior of transactional revenues is very similar. So it's -- the only difference is in the billings. The belief is that the new services that we add with a nonnative will have even higher retention since the value we generate for the clients for our corporates is much stronger and much deeper. We also cut the cost they have in the back office that they spend today to connect into services. And once they implement Gett, it replace this back office, and it's very unique and become a very valuable piece for the corporate. So we expect to have even stronger benchmark for our revenues. I hope I answered your question. If not, please say.

No. Great. And another question, you brought several times is if you can elaborate a bit where you are today in terms of geographic mix, which [ biggest ], I guess, 4 markets: Israel, Russia, U.K. and the U.S.

Fantastic question. So to bring clarity, we have our own marketplace historically, have a national operation in U.K., national operation in Russia, national in Israel. And we still have that marketplace, again, being profitable and growing. But with gen 10, the answer for that question become really global. And as of now, we're rolling out coverage in U.K. and U.S. and global airports. And as I showed you on this slide, we expect to have 35% coverage in next year and 50% coverage in supply, technical supply integration. So let me show you here. I think that's the best answer for that question.

Thanks.

We have a question, Dave, from the audience here, which is on customer churn. The question is why it drops from 2% to 10% from year 2 to 3? And is that because you have mainly 2-year contracts?

Fantastic. Let me touch that. I guess that was related to this slide, correct?

I guess so.

Yes. So first of all, those are factual results, okay? You can see that the churn is 20%, actually, it's less than 20%, it's about 17% something after 3 years. To give you perspective, is it -- or good, the golden standard for B2B companies, the public ones, that you can find on the internet stands for churn being 20% in the first year. Companies -- public companies that demonstrate churn of being less than 20% in the first year are considered to be golden. We are happy to report that corporate churn is 20% in 3 years. In the first year, we lose much less. So it's actually very good dynamics. Interestingly, we don't -- these dynamics achieved not by having a long-term contract. If anything, the contract can be terminated at any time, it actually shows that we -- the reason why we have such a good retention is that probably the value we generate, delights the customers and they keep working with us, not that they're obligated. It's not exclusive. They can stop at any time. And the factual results demonstrate that actually, it's not a legal contract or some kind of commercial tricks that hold the customer engaged, but rather the value we generate. And I like that result even better because that's actually driven by the service in the product.

Another question we have is around, I guess COVID, and if you could elaborate a bit how you navigated through the very volatile month in the early spring and how the recovery has been [ grinding ] since then in terms of rides and overall operations?

Yes. As everyone, it was it was devastating. And when the COVID started, we've been all very concerned how we'll pass that period. Gladly and factually, you can see that our results been actually better than before the COVID and better than the budget. Reasons for that is, again, Gett is entirely focused on B2B. Most of our revenue is coming from corporates. And during the COVID, what happened is we saw them also reducing the traffic. There are about -- less people using corporate solutions as well. But what was different is and it's interesting is that companies because they have a duty of care, but they also care really about the employees and the health. They started to spend more money in budgets, on people who actually come to the office. So they would rather use safer options such as personal ground transportation rather than public. And they compensated by this to the reduction in volume that we saw across the board, so -- in consumers, there is no mom and pop to compensate it. In the corporate, the dynamics is different, less people coming to the office. But the ones who come to the office, the company is actually willing to pay and motivate those users to use the corporate solution, individual corporate solutions, so they will come to office safe, rather than risking others. And beyond just human care and duty of care, it's also financially, it's a smart decision since there are unlimited potential damages for the company should they have the COVID situation in the office and prioritizing everyone. So that compensates it. And we saw -- and as I said, we started, we've been very worried. But eventually, we saw that we are performing according to the budget, and we also used other opportunities when being acted promptly and bold across all verticals and all levers. So as you can see, factually, again, we actually delivered our very best performance and demands financially on the -- both our operational profit and company EBITDA. So we feel comfortable with the outlook that we had before and keep having the same outlook for now. We didn't update our budget and the Board is aware that we reported according to original budget. We keep reporting according to original budget. And if all goes right, we expect actually to slightly overperform that original budget by the end of the year for the annual results.

And I guess another question going back to the product and the gen 10 platform, all those corporates, do you target specific segments of corporates in terms of size? Or is this a platform small and medium-term sized businesses as well? Or is it more -- you have a minimum number of employees for it to be relevant?

So the most value, it's interesting. The product we have is a true enterprise product. And when people talk business, the -- your question is very important because we need to make sure that we speak about the true enterprise. Our classical and the best customer is the Fortune 500 type of client because those customers experience the pain the most. They are the ones who have tens of thousands -- hundreds of thousands of employees across the world, different locations, and they have different vendors. And there is no system in the world, there is no Amadeus of ground transportation, Gett is the Amadeus of ground transportation today, is that they only can manage that. So the bigger the client, the bigger the pain, the more value we can contribute. And the value, as I mentioned, is both in savings, which is very direct. And I think the COVID times, if anything, motivated customers to upgrade infrastructure: a, to achieve better savings and cost; b, to manage the remote workforce. So the IT infrastructure and transportation infrastructure already [ wait ] for disruption, but with the COVID, this process has been expedited. So answering your question, global companies, large companies, the ones that have many vendors, are the classicals. And they already reflected in our portfolio, gladly, as I started the presentation, we are not new into corporate sales. That's what we've been doing for the last 10 years. And we build the infrastructure and organization that work like well-oiled machine, obviously, not from the very first year, but by now, after 10 years, and we have all supporting organization and sales organization that keeps signing about 500 new corporate clients every month.

I think as a follow-up to that. There's a question from the audience on the town, the total addressable market and how you see that sort of changing, if at all, I mean, on the back of COVID, home and less business travel, et cetera?

Yes. Yes. So clearly, no one knows at this -- by now, how much it will be affected long term. The -- I believe the common knowledge is that in the horizon of 1 or 2 years, there should be full rebound to the full traffic. We need also to remember that out of $1.4 trillion, the traffic that is local, not international, is more than 95%. So we like -- and it's a very good question, so when I say addressable market, $1.4 trillion, this is the -- how much companies spend on ground transportation. Most of that spend is local. Only 5% of the ground transportation spend goes for moving from one location to another. And the problem I mentioned before, the pain that customers are facing. It's not about maintaining international travel. This is the -- they have a pain to run the local national solution. And on the level of the company headquarters to aggregate all of those invoices and maintenance, that's where the problem is. The biggest problem indeed within international, that it's just 5%. So international might take long time until rebound, something like 2 years. The local spend, as we see from our existing budget performance is actually back to where it's been, again, please understand me right, there are less people coming to the offices, but the money spent per person almost compensated the decline. So I guess from what we see from the actual budget performance. As of now, they're probably spending locally the same amount of money they've been spending before. And clearly, they spent almost 0 on international, which is 5% of this $1.4 trillion. That as much -- that's as precise as I can answer that future question.

Good. Looking out, Dave, like if you allow yourself 5 years from now, what are your ambitions with Gett in terms of financial, size markets?

Yes. So that's really fascinating because by now, we have an ability to expand our footprint in a very short time without having any operation. So it's the first time then there is a solution in ground transportation space that is not limited by financial cost operational hassle to expand. And you asked about 5 years, it's probably too much in our terms. But in 2 years, maximum 3 time -- years, we expect to have a full global coverage means we can cover and serve any global company in full, 100% spend can go through us. And we might help the business to thrive by actually focusing what they do the best and delegate all the ground transportation management to us the same way it's done with Amadeus or any other services or AWS, right? I mean you don't hold and own servers anymore. So why should those companies keep holding hundreds of people in IT and finance just to do reimbursement. And by integrating or using cloud solution of Gett, they both save cost, about 25%, in some cases more. And they also use the infrastructure and satisfaction of the employees in a much better way. So yes, the vision is to help businesses globally to thrive. And by this, we have an opportunity to touch each and every business on the planet. And by this, we have an opportunity to touch the employees with the mobile solution we provide, and this is really fascinating and promising to us.

And so 2 years, you cover the entire world with nonnative supply, et cetera. But if we stretch it out a couple more years, what can that mean in terms of GMV that you take through your system and revenues to you? What's the -- where would you be happy?

We focus on actually making our product available globally, I just described because once that's achieved, the financials will be really favorable. Imagine managing $1.4 trillion in ground transportation spend goes through the system. It might be very significant [ markets ]. In average, we generate 10%, 15% of margin for the services we provide, and this is after we save 25% for companies, so it might be very significant for our future prospects. But I wouldn't -- yes, that's the market opportunity. But the first and foremost, we need to keep rolling out the service that we already created live in U.K. and keep signing customers and winning customers using that product. Once that happens, there is no other way for the companies really to run the infrastructure efficiently and that's about the time for them to upgrade the infrastructure to become modern. So to your question, in 5 years' time frame, we hope to help companies to upgrade the infrastructure to modern and digital and mobile infrastructure to move the remote workforce, which I believe will become now permanent. And by doing -- by bringing this value, we believe to make significant profits to our shareholders as well.

Okay. So yesterday, we had Voi here, and then I was wearing this cap because it says -- I got this cap when they reached 1 million rides, but now they're at 30 million rides, so they're giving me a new cap. So I'm looking for some Gett...

I like this [indiscernible]. Accept it.

Gett, what do you call it?

Merchandise.

Merchandise. And then there's -- then we have a guest here on the panel or on the speaker, who thinks that you should have 1/3 of the Forbes companies now, and you should you should send us a cap saying 200.

I will be happy to do so.

Anyway, I think -- thank you very much for being generous with your time, and good luck, and we're sort of -- we're very happy to be shareholders and it's a very, very exciting sort of project that you are -- that you -- I mean, the product you are very advanced in sort of launching, it's super exciting to follow. So we'll do this in a year's time and then -- high expectations.

Thank you very much. Expectations should be high. And we also want -- I want to use the opportunity to thank you for continued support. It's been really instrumental to us and we are now -- it's up to us to deliver on results, and we'll keep doing and hope to report the progress as we've been outlining right now. Thank you again, and good luck.

Thank you.