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

Hi, everyone. This is Per Brilioth at VNV Global, and this is our Q1 call. So welcome to that. And I hope people can see this slide presentation we put together. I'll flick through some pages there and then open up for Q&A. And diving straight into it. This presentation goes through a lot -- lots of background, which I don't think will be necessary for you guys. And so I'll just quickly go through the background. You all know that and what we do and to take you into the portfolio, which at least sort of graphically looks like this. And during this quarter, there hasn't been that many sort of larger changes in it. We can, in fact, go to the next slide, and you can see here, I mean, more sort of tax form, what this quarter has brought. I mean it's up a bit during the quarter. I mean, the NAV. And it's a mix of reasons for it being up a bit. Some of the holdings are up, some of the holdings are down. We issued some shares at a premium, that helps a bit. But the 2% up. And of course, the -- as you'll know by now, but maybe worth reiterating is that we put together our net asset value using the last price, if that's something that's -- if there's been a transaction of sort of larger size. And then failing that, we use a model. And the model, we look out that sort of financials over the next year or 2, and then we multiply that by multiples from a listed peer group. And then in many cases, in our portfolio, as you'll know, there's not a perfect sort of comparatives sort of in the listed world. So we'll have a -- we'll put together a group, and that gets us the mark. So hence, sort of stuff moving around a little bit, up 2% over the quarter. Pretty busy quarter. We issued new shares. We did a placement of $140 million in the early innings of the quarter. And then we've been busy investing that. We decided to do the rate primarily because we were far down the road of 2 transactions in our existing portfolio. Those have been completed. In the quarter, we completed -- we led the bridge round into SWVL, the transportation company for emerging markets. We also -- but only after the quarter, we finalized the larger check, EUR 35 million check into BlaBlaCar as part of a larger financing round. And where we led it, but we were also joined by Filip and Jonas of -- of who we know from Avito. And then also FMZ Ventures was read by a French individual with long background at primary, Alibaba. So -- and we're continuing to sort of have quite an intense deal flow, most of which we have declined, but we -- that it doesn't fit us for a variety of reasons. But there are several things we're working on right now. And some have been concluded, but it's a little bit too early to talk about them at this point in time, but we've -- names that we're very, very excited about. And then, of course, also after the year end, we -- or after the quarter's end, Hemnet IPOed, that IPOed in fact, yesterday. And Hemnet has -- we sold some of our shares alongside everyone else. And that gave us -- so that's provided some capital to us. But most importantly, I think we have -- we kept most of our shares as did everyone else. And of course, that's been good so far because the trade -- the stock has traded up. So in fact, the IPO price was higher than where we were carrying at 31st of March, which is also the input to this report. And then since the IPO, the stock has traded up. So we got about $16 million, $17 million in sales proceeds, and we have a remaining number of shares in Hemnet at today's price is roughly valued at $88 million. So good investment because we invested about $10 million. So it's one of these 10 baggers, really, which we're very happy about. But also NAV-wise, obviously, the NAV for the quarter ended at SEK 101.5 or SEK 101.6 to be exact. If you adjust that for the live Hemnet price, then you're looking at an NAV which is nearly SEK 107. Yes. So that in -- at a high level, it's our quarter. If we continue into Babylon, I don't know if you see these slides, but we've taken the time to sort of take a little bit of a step back and to sum up the -- where the -- in terms of presenting Babylon, we've taken a little bit of a step back and to try to sum up the position of the company in maybe a different context now that the company is so focused on the U.S. in -- management wise, but also product wise. And sort of just going back and describing it in a slightly different way than we have had before. I think it's -- first and foremost, as you all know, it's a huge market that they're swimming in a 10 -- global $10 trillion market, but maybe more relevantly, the addressable part, the relevant addressable part market -- part of the market in the U.S. for Babylon is nearly $900 billion. So that's the first point. And then the second point, which I know -- I mean, a lot of people stress around the company, we haven't stressed so much is that when we talk about investing into digital sort of disruptive companies, we -- it's often sort of connected with what problem they're solving. And here, defining the problem that Babylon's out to solve is that there's a real imbalance between the accessibility of health care and what quality is offered and then how would it cost basically. So the imbalance around that has been around for a long time, if you look at this on a global scale. And you can only really address it with the kind of sort of tech product that Babylon is offering. So I think those are 2 sort of important points to sort of remember and that we sort of maybe have lost in highlighting when we talk about the company. But then obviously, their product, which is really a product that's really hard to replicate in terms of the platform and the AI, that's the heart of the business. And then the fact also that they have now proved large revenues. We don't need it's -- for many years, this was all about building product. And now since a couple of years that come up and starting to produce large revenues with very large serious global counterparties. And it's obviously -- despite that, it's obviously still -- it still has lots of room to grow, and it is growing very, very quickly. And also then -- and this is really where we -- why it ticks all of our boxes is of network effects that if margins can really scale here. And we sort of see it, as you know that this is the one who has the most data wins. So Babylon sort of ticks in -- well, this quarter had 13,000 or over 13,000 daily consultations, which is up some 30%. And -- but also imagine the amount of data that, that provides a company compared to sort of a normal sort of GP practice, which maybe gets about the same number or I don't think even quite that per year. This sort of picks up maybe double of what a normal GP does per year, if this picks up every day. So it's -- that data drives the ability to sort of scale these margins. They can -- Babylon can add on clients and revenues at a much, much quicker pace that they can -- that they need to invest into technology and product. And then also remembering, as this slide tries to sort of map up, but this is not a new phenomenon now. This is not something that's come about during COVID. We see so many businesses come and try to raise money that sort of really were only started after sort of this world was hit with this virus. But this has been added for nearly a better part of a decade and starting off in a very sort of advanced health market with the U.K., taking that to a very, very rough health market in Rwanda with basically no pre-existing infrastructure and then scaling that further in Southeast Asia and now sort of going to nearly hypergrowth in the way they're taking on the world's largest health market in the U.S. And I think also it's worth highlighting and remembering now, especially now that the U.S. has become such a large part of this company's business is how they monetize through their products. And it's really -- well, we have 3 products here, but it's really 2 products. One is this -- is what they call Babylon 360 or Babylon value-based care, which basically sums up or takes into account all the previous products that they have built and driven -- which has driven revenues for them in the past. And this is, of course, value-based care. And if we're -- it's the part of the insurance system where insurance companies outsource the full sort of care product to a third party. And so a value-based care operator will assume sort of the full -- the full sort of financial liability of providing care to the insured lives. And then has, of course, a very -- it aligns the system around proactive care. So it obviously wants to sort of bring down the cost and manage the cost of keeping people sort of out of hospital. Traditionally, that's done in a very traditional way with -- by bringing people into sort of a doctor's appointment. But -- so -- but Babylon sort of brings a digital-first approach in this, which simply no one does. And this is enormous amounts of scale around this, which no one really sort of offers. And I think if you compare it for example for the -- to Oak Street Health, which is a $10 billion listed company in the U.S. and it's sort of come -- it's taken a better part of a decade to build up an amount of covered lives, shy of like 100,000. And Babylon has sort of come to sort of the same -- roughly the same number of covered lives in not even half a year. So it gives you sense of the scalability of this. And the other real sort of serious products here is where they take this technology and they license it out to third parties, as they have done in Southeast Asia with Prudential and now also would tell us in Canada. And I think also, finally, or importantly, at Babylon is to sort of emphasize how this management team has always been good. It always had sort of a very strong team around him. That over the past sort of -- well, quarter or half a year, it's really sort of built a strength in the management team sort of to make this a very U.S.-centric company. And now there's a sort of a world-class team with a background from Google, Amazon, Expedia with lots and lots of experience of scaling technology in difficult situation, which -- environments, which obviously, the health care market is and then supported by doctors and also supported by an advisory board, which is world-class in terms of sort of the background, especially with an emphasis on the U.S. side of things. So we put together these slides, and I thought they were good to highlight here for you and continue to use them as we meet with new investors. And then like before, we map up what part of the U.S. health care market is relevant for Babylon. It amounts to sort of a stunning $860 billion. The -- I mean, it's difficult to see them taking all of that, but they -- given that they're pretty low in offering what they do, it's a very good assumption that they'll be one of the leaders in taking on that market. With that, I'd like to sort of just touch as I say a few words around BlaBlaCar. And where we have invested more money during -- well, not quite during the quarter, but just after the quarter. Now in April, we concluded that deal, which was an equity deal, convertible deal of EUR 50 million. And which was also combined with the debt part, which we didn't take part of roughly another EUR 50 million. So leaving the company sort of very, very well funded. And we -- this deal was -- we've spoken about this, but it was led by us, but also brought in the Avito founders and former Alibaba employees. But I think this slide that, hopefully, you see now shows graphically how strong BlaBlaCar has been during the course of this COVID period. And that, yes, the market is down, of course, it is. I mean people have traveled much less during the pandemic, especially long distance. But it's important to note that BlaBlaCar is really sort of has really -- the contraction in their business has been much, much lower than all the other sort of travel companies out there. With everything else from Airbnb to Booking, Expedia Trainline, seeing their revenues drop much, much more than for BlaBlaCar. And the background that is, of course, that the long-distance travel that has happened during this pandemic has happened in the car. People are much more -- presents a much higher sort of sense of control in traveling in a car than traveling on a train, for example. And so whatever travel has gone on has gone on in the car. And that extends also to carpooling, and it's the carpooling part of BlaBlaCar that has been sort of really holding up well and has given them this position of high relative strength. And so that's important. The other thing to highlight is also how -- despite them being global leaders in their field in terms of long distance travel through buses and car and carpooling, it's also -- so early days. So there -- so BlaBlaCar's current footprint in the bus space has an addressable market of about $3 billion. But that dwarfed by the part of the market that's still of the offline part. So the current footprint, and I think it's a strong argument to say that all of this will move online or pretty much with all of this move on. But -- so if you include that the addressable market on the bus side, I think, is $20 billion. And then if you also assume that there are other geographies where their kind of product fits, there's further room for growth in terms of total addressable market, all the way up to $60 billion. So lots and lots of room to move up there. And the same goes for carpooling. And 75% of all long business trips in Europe are done by car. There's 2 billion car travels every year. I think it's interesting to highlight also that less than 2% of this travel is done through carpooling. So also enormous growth potential here. On average, there's 2 people in any car trip in the car, in any car trip in Europe, whereas in BlaBla, it's 4, double. So you can also get a sense of the sort of -- how you maximize utilization of this sort of equipment by sharing a car, so important. And as we highlighted in our report, I think it's also a strong point in that in this period where the world pretty much stood still in terms of travel. BlaBla still recorded 50 million passengers over this last year. So that's a lot of passengers. And finally, on BlaBlaCar, we have -- members are continuing to rise despite pandemic. So they're clocking in at 105 million members. And you would all remember, our rough and ready sort of investment case around this that we argue that over time, we'll see each member generate, on average, EUR 5 of net revenues to -- annual net debt revenues to BlaBlaCar. And we, in fact, think that -- when we think about conservative, we think the number of members can -- has a growth potential of another 60%, 160 million, I think, in fact, that may prove too conservative and that we're actually looking at adding another 100 million members to BlaBlaCar as they sort of penetrate larger parts of the countries, the markets in the country that they're in, and hence, sort of reaching member level of 200 million, which will then give them a revenue potential of EUR 1 billion. And that, of course, is -- will -- achieving that will not see them remaining at the sort of EUR 2 billion mark, that where we have them marked today. And not saying that they're going to sort of go all the way up to the absolute levels of their closest peer, which is Airbnb, at EUR 100 billion, but I think you sense the sort of the potential there. We -- Voi is continuing to develop well. The number of rides at the company grew by 117% in this quarter on a year-on-year basis. And the -- interestingly, also the revenues now in March 2021, which is very much a low season for this type of business exceeded revenues of June 2020, which is very much a high season, humble, of course, that June was still in the early innings of this pandemic, but still quite an interesting sort of fact. And the estimation is also that the pan-European market share of licensed scooters is -- that Voi has is 42%, which is a massive 80% presence in the U.K. in terms of licensed scooter. So really become the European -- over this past year really become the European leader in this space. And so -- yes, no, I think there's lots more to talk about, but given time running away, I think it's maybe better, it's best to open up for questions. So if the operator could help us organize that, that would be good.

[Operator Instructions] Okay. There appears to be no questions registered at this moment. So I'll hand back to the speaker.

Thanks all for listening in, and we'll see you in a quarter. You know where to find us if you want to talk about something in between. All right. Thanks.