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

Hello, and welcome to the VNV Global Q4 2020 Call. Today, I am pleased to present Per Brilioth, Chief Executive Officer. [Operator Instructions] Pat, please begin your meeting.

Thank you very much, and hello, everyone. I'll use a couple of slides and -- which we just cover sort of some thoughts about the report. And then we'll move to questions. But as the structure of the report is -- of the portfolio, forgive me, has of course, been changed somewhat, but the overall sort of -- the bigger names are still the bigger names. Babylon has been revalued for obvious reasons. And that is slightly larger part of the portfolio now, which is exciting. And Voi and Gett has, together with Babylon increased on -- at the expense of BlaBlaCar, which is down a little bit. But the overall sort of structure of the portfolio is one that you're familiar with. But in terms of the overview of this NAV, so yes, $11.36 per share in dollars, which is the dollar has fallen. So it's only NOK 93 or just under NOK 93 per share that if you adjust for the rights issue, that's up 22% year-on-year. And then big contributors in this last quarter as across the year, Babylon and Voi have been standouts. They have been clear beneficiaries of the COVID situation we're arguably still in. Gett has been a contributor in this last quarter, and BlaBlaCar was taken down a bit and come back to BlaBlaCar because we really think that, that's going to be a very interesting trajectory in front of itself now that we're going into the -- hopefully, the last inning of this COVID. Overall, the portfolio changed about just under $190 million upwards. Lots of driven by -- I mean, that's a change in NAV. Most of the NAV is that a model right now. So that will have been sort of -- now our models are, we look out over the near-term financials and apply a peer group multiple. In some cases, the peer group becomes very logical. In some other cases, it's -- there is nothing like our portfolio companies out there in the listed world. So it becomes more of a larger group that's -- that hopefully sort of collectively sort of gets us the best sort of peer group we can. And we have put some money to work during the quarter. Babylon, the main one, where we put together an SPV of totaling $100 million, we put in $35 million. The biggest new investment is Hungary Panda, which is a delivery hero for overseas Chinese communities. So laser focus on that community, which is a large community and perhaps growing given the stuff that's happening in some parts of -- around that country, but then also follow-ons in Voi and Booksy. Booksy is really sort of made a big step change here with attracting serious international money, American money for -- driven by the presence that they have now clearly demonstrated, especially in the U.S., but obviously, Poland is also a large part of that. I think if we just go company-by-company here and touch upon that quickly. Babylon, all of you know, of course, in an aggregated level, it's just under $400 million in our NAV now. We own just shy, 11% of the company. It's -- during the fourth quarter, they delivered 11,500 daily consultation. That is up nearly 50% year-on-year. And overall, global registrations have reached 6.7 million, which is up from 3.8 million as per year-end 2019. So as could be expected, sort of lots of activity around that company, but lots and lots of activity to come. I mean the company is really doing heavy lifting in securing very large contracts predominantly with their existing clients, but that will really sort of -- that will really sort of propel them into completely different sort of revenue base over these next 2 years. So I'll come back to that a little bit later. BlaBlaCar, as you know, has been -- is the one that's of our larger holdings is perhaps most negatively affected during COVID, and that's -- that remains now. I mean it lightened up a little bit during the easing, during the summer. But as you know, large parts of Europe, people are now at home. In the fourth quarter, they had just under 21 million passengers. That's down like 43% year-on-year, but quarter-on-quarter is up. So we see activity, especially in their emerging markets have really picked up over this last quarter, which is very positive to see. It's also very interesting to see that they are in a relative situation, relative to their competitors, which is mainly buses because there's no one else doing this on the C2C car side of things. Relative to their competitors on the bus side, they are in such a good spot because, obviously, long-distance travel has fallen. Today, people travel much less long distance than they did pre-COVID. That's going to change hopefully with vaccinations and us getting out of this pandemic. But the travel that does happen, that happens in a car. People are not willing to spend time on a bus or train. So the activity level of long distance basically happens in a car and on the BlaBla C2C car network. And so they also possess all sort of long-distance operation that goes on, on a third-party sort of relationship. And that puts them in possession of data that their competitors doesn't have. And so of course, BlaBla has own bus network, that's also close like to competitors. But the car side of things is really holding things up. They're very, very well financed. And there is -- they have a very interesting sort of 2021 ahead of themselves as competition suffers and may also give rise to interesting opportunities. On Voi. Voi, like I think we may have spoken about also in this sort of forum, but I mean despite all these restrictions that we've had during the year, I mean, Voi grew its total number of rights by 50%. And I mean, the -- their success, I think we can allow ourselves to describe it as in the U.K. has really propelled them into becoming the absolute leader in this space in Europe. And that's also helped them -- that put them on the radar screen of large U.S. institutions who were on the sidelines waiting for which European scooter platform will pull away as a winner. Voi has now done that with the success in the U.K. where they're basically taking 80% of the license that we issued. And that enabled them to complete this funding round in that we also talked about in December last year. So they raised a total of $160 million, led by RAIN Group of California and that revalued our investment in the company upwards from the lower valuation that was put in the midst of that COVID sort of -- or the early COVID days from visibility also into travel inside of city was much lower. Going on here, we have Gett, which has its -- well, the valuation is up 80% during the quarter. It's primarily driven by that the market multiples have been going upwards. We are now present on the Board. I'm on the Board of Gett, and I'm really fascinated by the speed of which they're sort of delivering their new product, which is SaaS product to their business clients and really puts them in a different sort of pocket story -- equity story-wise, et cetera, compared to their competitors, which is -- which are all pure ride-hailing. And sort of in the tennis maniac kind of description that I make on myself, I think I'm a tennis maniac. And my attempt to sort of map out our entire portfolio in sort of tennis players, I think it's -- that all really comes from that I calm myself more and more describing 3 darlings in the portfolio as our next-generation players. Next generation, those players who are still young, they're not -- they may not even be in the top 100, but -- so more risky. But there're some of those that will be the next sort of Nadal of this world. So we think these 3 of them in our portfolio, books SWVL and Dostavista. We think all 3 of them are around $200 million, some are a little bit more, some a little bit less. We own around 15%. But I think all of those will double again over the next sort of 3 years in their funding rounds. The businesses are growing. They will need funding, they will attract increasingly sort of larger check kind of investors. So collectively, they could be like $100 million, like -- sorry, $1 billion each of them. And so as owning 15%, they collectively could sort of start to approach like $0.5 billion, $500 million in our portfolio as sort of visibility grows over these 3 years and funding rounds are completed. And we don't talk much about them today, but because they're small in relation to those large ones, but these are really -- these will come out of the shadows of Babylon and BlaBlaCar and Voi in the same way as those companies did from Avito. So SWVL is destructing intercity public transportation in large emerging market cities, started in Cairo, going elsewhere. We -- this -- if I had to choose amongst the ones, this would probably be the standout one. We own 13% of that Booksy, SaaS-driven booking platform, which is going into a marketplace type of business just completed around where -- actually, our France's prince invested alongside some Americans. So we [indiscernible] Capital led a $70 million funding round in the company, which closed just now. And we participated to [indiscernible] that we own about 10%. And Dostavista is this last mile delivery service, which offers on demand logistics for SMEs, starting in Russia, it's growing very, very fast in primarily Asia. We don't talk much about ESG and sustainability here in this format that we are doing an enormous amount of work on that as everyone else. We're not doing it because we are -- I mean, for our operations, although we will start to report by GRI Standards, now. And so we will comply fully with that. And -- but we -- I think it's just worth noting that all our investments or business model that sort of hinges on offer products to consumers that are completely sort of conscious over these different elements of ESG. And so although we sort of monitor it when we enter and when we are present at these portfolio companies' boards, they are -- their products are driven by this from day one. So BlaBlaCar is -- has delivered 1.6 million tons of carbon savings. Voi, of course, lower COT per kilometer than anyone else. Babylon is offering health care with the help of Bill & Melinda Gates Foundation to large parts of Africa. And Gett sort of in the similar fashion to Voi. It's a very climate efficient way to run transportation in these cities. I think the only other sort of point I'd like to make before we go over to Q&A is, of course, that I note where we are trading in relation to our NAV. And I've only noted this -- when this has happened in our previous sort of history, we -- it's usually been when one of our portfolio companies has been in the run-up to an IPO. It happens from time to time. I think we are very conscious of building a portfolio that's difficult for our typical shareholders to access themselves, we think our portfolio has the potential to do deliver a lot of value over the longer term. As you know, we're very long-term shareholders. And so we -- and although our NAV should be put together, so it reflects a fair value, we think it leaves a lot of upside. So us trading above that, I don't think it's odd by any measure. But I think it's noticeable that it seems to sort of coincide clear runs above our NAV coincides with portfolio companies going public. And I think there may be some sort of -- for -- I mean, I think as you've all seen, there are IPO sort of listing ambition across quite a few of our portfolio companies, not driven by us. We are not going to exit the main ones. We are here for the long term, we will sell when the founders sell. But for some companies, it makes sense from an operational sort of standpoint to become public. And of course, without sort of no -- without going into any details or if it may happen or not happen, it's just clear that there's a big price discrepancy in the market for which -- where Babylon is active between public and private holdings. So obviously, a listing sort of environment would allow a company like Babylon to gain a currency for M&A, which is something that they're already engaged with and are funding out of their balance sheet. When we value a company like Babylon now with a model, we have a peer group that is -- that's -- that we think is relevant. It's relevant here because mostly they're involved in some sort of fashion in digital health. There's none in the clear group that is as technologically advanced or of first, the same sort of product and with the same sort of prospect as Babylon. So I think it's fair to say that I think the median multiple that we get is like 12% and x on revenues, and we look on that -- and we discount that, because we are not listed -- Babylon is not listed, et cetera. I think, though, if you remember, if Babylon were the list, and a public market investor would look at it, you -- I think it's easy to put together a scenario where you look at the presentation that Babylon showed us at our Capital Markets Day last year. And that had projections of a $900 million revenue base in -- during 2022. Now there's -- that's large growth, and that needs to be delivered. And there's risk with everything, things could be delayed, things could also come earlier. But the company is performing well, and things are rolling onto plan. So if you take, I think, the cleanness maybe, at least in terms of sort of digital health exposure in the U.S., I think a company like Teladoc, if you take that kind of multiple and look out a year on revenues approaching $1 billion, you, of course, get to sort of values of Babylon that they are nowhere near where we have them in our mark. But where we have them, makes sense, we look not-so-distant in the future. We look nearer in the future, and we use a multiple that comes from an average from a median of a peer group that involves companies with maybe a multiple level are not relevant for Babylon. So I think that's important to note. And so if this company were to go public at some point, then I think there's a margin for that maybe we trade at the -- not the premium, but at the discount -- in a large discount. I think with that note, I think, I'll leave it over to questions. And if the operator could help us handle that, that would be great.

[Operator Instructions] We have a question from the line of Ramil Koria from SEB.

Thank you, Per, for the presentation. Just 2, if I may, on Babylon. First off, apologies if you've already mentioned it. But with the new convertible financing, should we consider Babylon sort of fully financed for the time being? Or how should we consider the financing situation now post the convertible?

Yes. The convertible certainly helps or the convertible is the -- is our financing. We put together an SPV that predominantly sort of consists of a convertible that will convert at the -- into equity at the valuation of their next funding round with a discount. So -- which is -- which I think is attractive. So we hold $35 million of that $100 million financing and other investors holds the rest. And so to your question is that, that money, together with some other -- no, maybe not funding routes, but sort of operational deals that they're doing. The company has funded under some scenarios all the way to sort of becoming EBITDA positive. Having said that, there's lots of opportunities out there for a company like Babylon, so that may change. But they're in a better situation -- they're in a good situation now in terms of funding, and they don't have to rush into anything. But there is lots of activity and which may have them looking up funding routes of different sorts.

That's very clear. Just a slight follow-up on that. I mean, could you just remind me about your policy in terms of owning public companies. If Babylon, the other shareholders are pushing for potential IPO, how would you go about in such a scenario where an IPO did materialize?

Yes. No, I mean, what we have traditionally done with the company, I mean, long term, we will not own stuff that is listed. We feel that our shareholders be at large Swedish or international institutions or Swedish retail, they can do that themselves in a very efficient way now. And so long term, we are not holders of that. We note that it's -- we're close to the company, and we -- should it go public now -- I think our rule of thumb is that we sell when -- I mean, not I think, but our rule of thumb is that we sell on the founders sell. I think even if this company should go public now to even double where we have it at, it leaves such a large upside. So I don't think -- I'm quite sure that the founder won't sell any stock. And hence, that box of ours, that rule of thumb of ours is not sort of take. But long term, it's not -- it's -- I think it doesn't make sense for us to hold listed stocks. So -- but then there -- what we've done in the past is that in some cases where we felt that there was a clear upside, we've dividended out these holdings to shareholders pretty quickly. And where -- and in other cases, I think of, is a good example. And then they IPOed in 2013, we sold into that IPO because we felt the price was full. And so -- but we don't have anything in our charter, which sort of tells us that we have to sort of sell into an IPO, we have to distribute. We can hold listed things. We just don't think it makes sense to do that long term.

That's very clear. And the final one for me, perhaps on the operational side on Babylon, again. I mean, we listen to all on your Capital Markets week saying that the company aims at having an annual recurring revenue of USD 600 million by year-end. And I haven't, to my knowledge, seen any deal announcements since. Could you just take us through, first off, if any contracts indeed have been won? And then secondly, if they haven't, you touched upon it yourself. But why are we seeing a slight delay in contract wins?

No. So they are delivering their contracts. They're live with a couple of new contracts during the autumn. And they -- and from getting live, they will also expand, and then revenues will start to show. They are -- pretty much all their growth in revenue over these coming years are all sort of sourced from expansion of existing sort of commercial relationships, existing clients, that's to say. So obviously, the team in the U.S., NHS, U.K., Prudential and Southeast Asia are or to sort of 3 large clients where they have expanding relationships. And so those are all on plan. And so it's not Babylon being a private company and it's not -- I'm not sure that they all get sort of become public, those relationships. But I think what's fair to say from where I am, it's -- they are -- things are on plan. It's not -- it takes a long time to put these contracts together. And then a contract is one thing, and then it takes time also to start to implement and transform a contract into actual revenues. Because the risk of those revenues coming in is very low once you have a contract signed, but there's still a time gap between that. So I think that's all pretty much in hand as per plan from the company. So delivering well there.

[Operator Instructions] We have a question from the line of Stefan Wård from Pareto Securities.

And a couple of questions or 3 actually small questions, if I may. Yes if you could repeat the outlook for the 3 sort of growth investments that you highlighted in the presentation, I didn't follow exactly on the valuation potential that we saw there maybe you can start with that?

Yes. So those 3 are -- I did it in perhaps to sort of back of the envelope or high-level way. But what I did say was that they're all around $200 million, Dostavista is a little bit lower. SWVL certainly Booksy are higher, I mean Booksy quite a bit higher, but around $200 million, certainly on an average basis. And from that basis, I think they all have the potential to double and then double again as they over 3 years complete, probably 2 more funding rounds, which on each funding round, I think, will have the potential to be double of the previous one because these companies are growing so fastly. It's a risk with everything, and this could be wrong. I could turn out to be wrong. But for where we are now, I think that's entirely possible. And hence, $200 million goes to $400 million, $400 million goes to $1 billion -- close to $800 million, of course. And so -- and if you sort of -- if you sort of allow yourself sort of the schedule rounding up to $1 billion each, then us owning 15% of that gets you to about a $450 million collective value of those 3 very, very high level, Stefan. So -- but I think that the growth and that they will be able to sort of to perform strongly over the sort of next 36 months and double and double again, I think it's entirely possible. So then collectively, it could be like a $0.5 billion part of our portfolio across 3 companies, bigger than Babylon is today. Over 3 years, I think Babylon will be nowhere near where it is today, of course. But anyway, that was the logic.

Perfect. Thank you very much. And onto the next question, it's a little bit about -- I haven't seen, but if you could give -- do you have like a rough ballpark of annual investment needs? Or is that not a relevant measure for you? And what's the [indiscernible] capture.

Yes. No, I think we don't typically supply that. I think it's the only company we know that will raise around this year and that we know we will want to participate in SWVL. So SWVL is growing very fast. They have large opportunities across Middle East, Asia and Latin America. That company, you -- I think you see doing $100 million around. We own 15% of it. That's probably not until later in the year, but if there are good deals to be done earlier, we could -- that's something we have our eyes on, and we're very close to the company. My colleague, Bjorn is on the Board. And yes, so that's what we know. There are -- most others are funded in terms of operations. There is some exception. But obviously, Babylon got some money from us and did some other sort of -- got some money from another route as well. And Voi is very fund. They get sort of funded. BlaBla has a large balance sheet. The other -- so SWVL will be the standout. I think the -- there may be opportunities in the portfolio. And for example, around something like BlaBlaCar, who is so strong in relation to their competitors, and there are so many opportunities out there on their need so that certainly doesn't need to raise any money for defensive reasons, they have a very large cash pile for that on their balance sheet. But we'd like them to get -- it will be great -- they have a great opportunity to become more aggressive. So -- but -- so there may be sort of funding needs in the portfolio for aggressive reasons, but those also come -- those also -- it's -- they're price differently. Of course, if they're done for aggressive reasons rather than defensive reasons. And then we continuously look for new investments. We have the scout program going now, where we have a 4 or 5 scouts who are building portfolios of 5 to 10 names each. We hope that will, over the course of this year, generate a portfolio of 40, 50 different names, which will be very small, and we won't talk about them until they come into the next round or the next round, where we have the optionality to sort of enter directly into the cap table rather than via our scout programs. But that's -- in the very early days, those checks are very small. On an aggregate level, they're still small. It's more to have sort of exposure to those companies from a young stage. And when they grow older, they become more relevant and hence, also the check sizes are bigger. But -- so we have lots of activity going on there, but we're also looking at new investments in our space.

Okay. And then a last question also relating to Babylon. You mentioned -- I fully agree with the -- that Babylon looks a bit. It's conservative value if compared to how it could be priced in the market today. But you mentioned the figure there like $12 billion. Given what's your view on the prospects of Babylon and if we just assume that prevailing evaluations are sustainable for that segment? Where would you be a seller sort of where would you see that -- what's the potential for Babylon, say in 5-year format would you say if you would like to put the figure out there?

I don't think we'd be a seller of this below $20 billion. And that would be in the current sort of environment over the -- and the current environment in a sort of -- maybe if you look over this year and next year, I think sort of the revenue growth of that company will prove up those sort of valuations. And then beyond that, there will be upside. I mean, their addressable market in the U.S. is close to $1 trillion. I'm not saying that they're going to take all that, but there's a large market to gun for and they're offering something that no one else is. And so -- and the multiples that their listed peers are trading at, they obviously factor in a lot of growth, but I think Babylon sort of stands out as -- they will be able to deliver at least the same growth as their competitors and likely more because of their products being so unique in many ways.

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

Thank you very much for your participation here, everyone, and let us know if there's anything else we can help you with. Otherwise, we'll talk to you in 3 months. Okay. Bye-bye.