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

Ladies and gentlemen, welcome to VNV Global Q3 Report for 2020. Today, I am pleased to present Per Brilioth, Chief Executive Officer. [Operator Instructions] I will now hand over to Per. Please begin your meeting.

Thank you, and hi, everyone. I'll quickly flick through some slides as usual, and then I will open up for Q&A. I think you will be familiar with our history, and I will go directly into sort of some points on this quarter. So on a per share basis, sort of the NAV is down a little bit on the 9 months. If you exclude the rights issue, which was obviously down below NAV, the NAV is about flat over the same period. So that's how the math works. And we -- but overall, in this last quarter, there was about $45 million of upwards movement in the portfolio. Most of the things in the portfolio are based on a model now or the NAV is constructed through using valuation models. And we've done this since the start of COVID and also, of course, an absence of transactions. And I thought I'd -- the portfolio -- I mean the movements in the portfolio have not been so dramatic. So the largest holdings are still the largest holdings, Babylon, followed by BlaBla, followed by Gett, followed by Voi. And all in all, it's about a $900 million net asset value. This is, of course, now including the cash we raised in the rights issue. That's about SEK 85 per share. Babylon is still sort of enjoying a lot of attention in terms of the overall macro in the sector and both from clients operationally, big focus on the U.S. and a very, very sort of interesting development that's going on around the company. We -- they -- in this last quarter that ended on September 30, they did about 11,000 daily consultations, which is up about 35% year-on-year. The sort of diligent reader here will notice that that's up less than the second quarter. But that's, of course, the second quarter was maybe in the midst of the COVID-19 pandemic, and activity was higher. But -- and now in sort of a recovery phase, then we'll see what happens now in Q4 and Q1. Of course, that remains to be seen. But in the sort of the summer recovery phase, it was still up from last year but up a little less than during that sort of terrible second quarter in terms of health of the planet, so to speak. And we've -- anecdotally, I think we've also heard that, especially here in Sweden, amongst the telehealth operators, is that in general -- this may differ from country to country, I guess. But in general, here, it's been a fact that people are -- apart from COVID, people have been very healthy. People have washed their hands and been very, very careful not to get sort of any disease. And hence, sort of the activity beyond COVID has been slower than usual. But that doesn't -- that, I guess, is a glimpse into just a very short space of time. The bigger picture is, of course, that digital health care, primary care and health care overall is going digital. And this, the pandemic that we've been through, has accelerated that a lot. BlaBlaCar is -- I think we've spoken about this. And BlaBlaCar is, of course, tough patch in the second quarter and continuing sort of tough patch now as well, especially if you compare it to other mobility players in our portfolio like Voi. So clearly, people have started moving around in their own cities. And when they move around in their own cities, they don't want to go on the tube or the bus. So they walk, go by car. And e-scooter platforms fit very, very well into this, so we'll come back to that. But there's been less sort of -- the recovery phase has been -- people have been less prone in the recovery phase to move between cities. So I think -- I mean, in some places, you've been sort of -- it's not been possible to move between cities. It's not legally sort of -- you've not been allowed to move. And where we've been allowed to move, people have been sort of trying to stay put. And that has -- that's the background to the relatively more negative effect of BlaBlaCar versus Voi. However, the people who do move between cities have -- in a similar fashion to what we see inside the cities, are not -- do not want to go on trains and buses or airplanes. They prefer to go by car. And car, hence, becomes the only sort of -- or the preferred sort of method of transportation in -- long distance, and that's also viewed. You can see that in BlaBlaCar, where the car side of things has come back in a big way, but the bus side of things have -- is slower. So that -- it's very interesting for BlaBlaCar because they -- of course, they enjoy that sort of recovery phase on the car side of things. But -- and that also gives them not only sort of something to operate with currently, but it also gives them a big edge in terms of data, when and how to sort of relaunch buses, which they, of course, are -- they're active in that space, and they're larger competitors. There's no one else who does the C2C sort of car thing. But there are, of course, competitors on the bus side of things, and they are at a disadvantage then compared to BlaBlaCar. Gett is continuing its pivot. Of course, Q3 better than Q2. Recovery, people prefer to go by car inside cities rather than go by public transport. And the company is continuing to -- so it's continuing its pivot from sort of a classic ride-hailing to a SaaS business, a software, a seller software, to big corporations to handle all their ground transportation. We did, during this third quarter, invest a little bit more in the final round of Gett. It wasn't -- it was $3 million. So it doesn't really change the overall picture of things, but nevertheless. Gett, as we try to sort of point out in this report, is very strong. Again, back to the -- this has become preferred means of transportation inside cities, and Voi is in the center of that. They have clearly sort of now become the largest player in Europe. Unit economics are very strong, both in terms of swapping of batteries, driving down OpEx and the lifetime of the scooters going into multiple, multiple years now, and so the depreciation factor coming down. And they've, in fact, been EBITDA positive for -- since July, double-digit at the group level, so very, very strong. They've also -- we've spoken about this, but the big sort of effect on the COVID-19 on the e-scooter -- in the e-scooter world, or at least the e-scooter world in terms of Europe, is that the U.K. has opened up for e-scooter platforms. And basically, every city across the U.K. is now starting -- launching e-scooter platforms and are all doing this under licensing. And Voi has basically doubled their licenses overall because they picked up pretty much everyone, and many of them exclusive in the U.K. And so U.K., of course, being a very big market for this, it's really put them, Voi, on the -- it's made them the clear leader in Europe, so not only in terms of activity across their existing sort of markets where they operate, where they sort of -- they have pushed away from competition, but also in terms of licenses, which is, of course, a very important part of this business. And so that has meant that they are attracting serious attention from the -- from large investors in the U.S. And I mean the company did close around -- during the course of this quarter, we invested $10 million. And that's been up slightly, but it's really catching the attention of some very large investors. Their leadership in Europe, everyone has been waiting sort of who will pull away and who will be the leader, and we want to back that one. So it's looking very likely that they won't have to spend so much time in fundraising. They're getting a lot of inbound, which will be interesting in -- both in terms of valuation but also in terms of them getting funded and also, in that sense, sort of pulling away from competition. So those are the big ones in our portfolio. And then we were sort of thinking that we talk a lot about those big ones. And we -- I mean we -- I hope you all listened into the Capital Markets Day -- or Capital Markets Week that we did last week, where 5 companies presented, and those were the 4 big ones and SWVL. And if you missed those, you can look at recordings, which are available on our website. But the 4 largest holdings in our portfolio, so the 4 companies that presented outside of SWVL last week, they -- that's about 65% of the portfolio. And there's -- we're not about to sell any of those because there's a lot of upside from -- in each and every one of those. And we, as you know, permanent capital, no stress to sell whatsoever and can hold us for a long time, and we think there's lots of upside. But we still thought of it sort of what if, in a sort of an Avito fashion, those got sold and we distributed that money in -- again, in an Avito fashion, what would sort of show up under the shadow of those 4 companies in the same way that those 4 companies sort of showed up from the shadow. When the shadow of Avito was gone, those 4 companies became more relevant for us for what would be the drivers in our portfolio. And so we sort of thought that we'd sort of use the opportunity to highlight and do a little bit more focus on the smaller names. And some of them are really becoming -- I mean all of them are performing very, very well, and they are attracting attention from large investors. They all look to be sort of looking to be reprised, and they are becoming more and more material in the portfolio. And -- but they are like next-gen. In tennis lingo, they are the next-generation here. And I think in some years, they will have grown enough also in terms of size of our portfolio to catch the attention, so it's good to focus on them a little bit. And first, that is SWVL, and SWVL feels superfluous to talk about because both Dany and Mostafa, I think, presented the company very, very well at the Capital Markets Day the other week. That was on Friday, so a week ago. And we -- so I basically would encourage you to sort of have a look at that. But it's a company that -- I mean, of course, so they sold a big, big problem in these large metropolitan emerging market cities. So they basically sold master transportation in those cities. And again, I encourage you to sort of listen to Mostafa, but it's -- this clearly has network effects, a lot through the data angle here, and the markets are enormous. So this is -- if you look across these classical emerging markets, you're basically looking at $150 billion market, which is, I think you'd call it broken. And again, I think Mostafa will probably be the first sort of Arab entrepreneur to build a truly global product. I mean this is now at some $250-ish million. And I think this is maybe the one that will help us to move to $1 billion and beyond in -- amongst the small ones in our portfolio. But there are others. And 2 that sort of -- that are fundraising now and are attracting a lot of attention, and rightly so, are Booksy and Dostavista. So Booksy, I think we've talked about before, but it's a SaaS-driven booking platform for the beauty industry. Stefan Batory, a Polish guy who started this in Poland, they basically dominated Poland and then expanded this into the U.S. And it's really the starting point from a SaaS business and the revenue generated by that, and then going from that sort of base into a marketplace seems to be a more attractive way to sort of create the marketplace than the sort of more traditional ways to build it, which many people have tried and not really succeeded before. So we know people -- slow in the second quarter, COVID, sort of people didn't cut their hair and didn't fix their nails and et cetera, but it's come back in a big, big way now in the third quarter. And we're super excited to see this company and the attention that it's getting from investors. So only 1.5% of our portfolio and only about $50 million right now, but one that we'd like to found as it sort of continues to grow. And I know it's getting attention from quite large investors in the U.S., so that's interesting. And Dostavista is -- it's essentially a marketplace for last-mile delivery. It offers on-demand logistics for SMEs for within 90 minutes or at a certain exact time. And it's, of course, started in Russia. It's profitable in Russia, and it's used that experience and tech to grow in other emerging markets. And it's -- of course, this is one of these sort of areas which -- where COVID had a positive effect, but that positive effect is sort of -- is continuing for them, and they're growing very, very fast. So GMV now is about $100 million and take rate will have them down to about $20 million, $30 million, but that's something that we expect to double every year for quite a few years. And so we think this will basically reach $0.5 billion in revenue in the -- some years down the road. But as they create increasing amount of visibility that they can sort of deliver a -- sort of a market and a profitability that they have in Russia and other emerging markets, too, I think this -- you'll basically see that $500 million of revenue is entirely possible, network effects type of margins below that. And you can sort of sense that this company will revalue significantly from the sort of $100 million where we have it marked today. I thought I'd sort of stop there and open up for questions. If the operator could help us, that would be great.

[Operator Instructions] We have a question from Lars-Ola Hellstrom from Pareto Securities.

I guess the CMD last week cover most of it, but one thing that I noticed in the report is Voi and the potential for another financing round. Is it that growth in U.K. is exceeding expectation widely and that a new funding round might be needed to fully deliver and take the opportunity there? If it's so, so we should interpret that line in the report?

Yes. Well, it's early days in the U.K., right? I mean we're not -- we're only a month or so in. But the whole market is sort of -- is executed on the licenses, and Voi has really made a killing in terms of those licenses. So yes, activity there will be large. And they just raised funding, and -- so which covers their start there, but that seems to be a market that will grow further. London, of course, is yet to open up, which will happen in the next quarter or 2. And so the company is not in a need for an immediate sort of funding just now, like 5 minutes after they closed, the round we led during the second quarter, but they are getting attention. And more capital will be needed sort of to cement the sort of pull position that they have now in Europe. And then they will be optimistic about sort of entertaining sort of the interest that they get from the sort of -- from a different sort of league of investors, if you will.

So what kind of investors do you see coming in now when they have proved themselves that they can be profitable? So I guess investors in general now is viewing the e-scooter industry differently compared to just 6 months ago.

Absolutely. I mean, no, these are growth investors, right? They're large growth investors writing sort of $100 million checks. So -- and there's a bunch of those that got involved early with Lyon and Bird, but there's a bunch of those who didn't. And they've sort of been waiting for the e-scooter market in Europe to take form and sort of a little bit pushed ahead by the COVID-19 sort of situation in the second quarter. It's now taken form and Voi is sort of pulling away. And that, I think, is sort of putting them in a good position in terms of funding, too.

Okay. And a question here about the Babylon. We all saw the great presentation last week. But given the valuation you have in the balance sheet right now, how should we interpret if Babylon delivers and sign the value-based contractor in Q4, so they will have an annual revenue run rate of $600 million by end of this year? Would that be a trigger for a revaluation in your model if they are able to close those deals for...

Yes. We -- it's sort of difficult to sort of -- to, in advance, sort of say this will revalue, et cetera. But clearly, value-based care is -- it's a super interesting opportunity for them. It's sort of a very, very large part of the U.S. health industry, primary care, macro. So if you want to become present there in a big way, it's a very, very natural starting point, also on the back of -- it makes very logical for Babylon to do this on the back of the performance that they've sort of clearly demonstrated in the U.K. with NHS, which is not strictly value-based care but which basically has huge responsibility for -- in a similar fashion to value-based care. So I -- so -- but it's -- I think it will be -- when you have sort of a half year or year in the bag, so to speak, of experience, and we as financial analysts can look back on an entry and revenue starting to sort of be logged accounting-wise, I think it will be much easier to sort of -- that visibility will be easier to sort of revalue it and potentially in a big way. But now it's a little bit too early to do that despite them being very advanced on these contracts, and revenues will clearly -- are clearly starting to come in. One should also bear in mind that, of course, value-based care, in a traditional sense, is not a super high-margin business. And -- but that's also the opportunity for someone like Babylon, who can digitalize a traditional way of running value-based care, which they have done in the U.K. with NHS, and they've taken hospital costs down by 35%. So -- but when you can demonstrate that, that's also relevant for the sort of existing sort of pools of revenue, visibility into that, that's all -- I would say that that's a very good reason, a good trigger for revaluation.

Okay. And you still haven't used so much of the cash you've raised. But can you give some update on what share you expect to invest in the existing portfolio and what share to invest for new investments?

Well, we spoke about this going into the rights issue. We had a couple of opportunities that were large and that were not new. Some of them never materialized because -- for different reasons. And -- but we have really found -- I mean, so Voi, we've announced and there's been a couple of -- we've announced a couple of investments, right? Inturn, we haven't spoken about but Inturn, we've all in all invested now $11 million. Inturn is a SaaS business for large corporates' inventory, but that's also like Booksy. It's a SaaS business that develops into a marketplace. We find that sort of path of evolution. It's super, super interesting. So we -- that is an example of a new investment. We've made some more, which are smaller than that but -- and sort of, in the large scheme of things, are still sort of smaller. And I would say that the main opportunity and one that we're engaging in as we speak and, hopefully, we'll be able to sort of report more on that when we do this next time around, right, in 3 months' time, is that there's super interesting opportunities within the existing portfolio in the big names and in some of these sort of next-generation stars, kind of who are all seeing sort of attention and are -- should fund themselves because they're performing well and should be aggressive. So I think we have quite a bit of stuff going on as we speak, and it's quite focused on the existing portfolio.

[Operator Instructions] There are no further questions registered, so I hand back to the speaker.

Well, great. Well, thank you very much for listening in, and I look forward to talking to you early in 2021. Until then, stay healthy and safe. Thank you.