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

All right. Welcome to VNV Global's Fourth Quarter and 12 month Report for 2023 Conference Call. And the call today, we have CEO, Per Brilioth, our colleague, Dennis Mohammad, in the Investment team and myself, Bjorn Von Sivers, CFO of the company. As per usual, we thought we start with a quick rundown of the latest development during the quarter, followed by a Q&A. [Operator Instructions] With that, I'll leave it to Per to kick us up. Please Per go ahead.

Thank you. Thank you, Bjorn, and welcome, everybody. I try to keep this brief because It's sort of an uneventful quarter. There's not that much news to talk about. That doesn't really mean that we've been just taking it very easy. So a lot of activity. But in terms of reporting and also sort of the swings of the NAV, is not that dramatic. So for the quarter, we're down 6%, for the year we're down 5%. Obviously, for the year, that hides a lot of stuff that happened, which we've highlighted during the year, obviously, Babylon, our DRO Babylon [indiscernible]. I try to pick up in this report, too, we -- some of the stuff that -- so I think everybody thought went to 0 is still alive. One of them is Swivel. Those of you who have been with us for a while will remember Swivel level, pretty chunky part of our portfolio, listed to SPAC and then really had a horrible development in its listed world. It's still listed, but has come out of a tough period and is now doing pretty well. So that's really coming back with a vengeance. And I really look forward to sort of together with you following that and for this year. But we're -- this quarter, we're down 6%. And I say that it's sort of a flat quarter, obviously, hate it when it's down. But it's -- but when you invest for sort of 30% to 40% per year, annually every year for 10 years and sort of focusing on a quarter-by-quarter basis is something that we have to do because we're listed, but it's not really what we -- what this is about. I hope you won't find me and I hope we haven't sort of pounded our chefs or whatever one says in English, when we're up 6% in 1 quarter, it's more the long term, that's we are here for. But from quarter-to-quarter, as you all know, and Bjorn will take you through in much more detail, we value. I mean, most of our portfolio today is valued off the back of valuation models. And we pick up valuation multiples from the listed world, where we create peer groups. And for this quarter, the peer groups that we've had are inhibited by companies like Delivery Hero, Airbnb and like Delivery Hero has been, had a pretty rough quarter, it's been down for company-specific reasons that next quarter could very well be up. So really, I guess the point I'm trying to make is that these sort of interest wing quarters is makes this valuation more art and time. Furthermore, and if you flip to the next page, what's going on in our portfolio is that more and more of the portfolio is becoming EBITDA positive, as this -- which is, of course, very positive. And this picture is one which we've sort of updated throughout the year and which shows, of course, that our portfolio is becoming EBITDA positive of the top 10 companies, 2023 was the first year ever, which was EBITDA positive. If you just take our [indiscernible] those earnings at those companies. 2 years ago, those -- that same portfolio with everything else kept the same was like a negative 30%, 35%. So really sort of a trend, not there's growth in the sales of these companies, but more than that, these companies have been very active in taking out excess burn, excess costs, et cetera, and that this has helped. I want to note that here, you see that we've graded out Voi because Voi is EBITDA just around the breakeven point for 2023. But really at Voi is the one company in a portfolio where we should really talk about EBIT because as opposed to most other companies, I think all other companies in our portfolio, this company Voi owns and runs and depreciates [indiscernible]. So EBIT is the one that's sort of more equal to cash flow whereas in a company like Lavaca, for example, EBITDA is equal to cash flow. And yes, so 13% going to 12% here is just a factor that in this quarter, we -- Voi has come down a little bit as we wrote it down a little bit. And this is again, back of the peer group that we use for Voi. And nothing else Voi is doing really well. what -- but what this also means is that in our portfolio, we've had -- when the companies have been EBITDA negative, we've been forced to sort of use a price to sales multiple, now that they're becoming EBITDA positive, become profitable, it will increasingly going forward, be much more relevant to look at earnings multiples. And -- but when you do that shift, you can get some stuff that moves around a little bit. Again, it's something sort of to sort of highlight that quarter-to-quarter, you might see some movements, as we start to use earning multiples instead of sales multiple, but that's all very, very natural. The -- of course, when we -- the best is here that we don't use valuation models and that we reliance, the real large transactions in the portfolio. And I don't know if you've noted that in our portfolio, in one of the larger holdings have moved from model to transaction. That's Booksy, where you've seen that, that's a change. So that's obviously on the back of that there was a large piece of the company that changed NAVs during the quarter. You look it up, and you'll see some details around that. We've used that pricing point as input for our model and for our mark in our NAV. And so I think that's also a good teller, a good sort of indication of that one that there there's more transactions going on in our part of the world and our part of the capital market stuff, which is obviously a positive. So that we can sort of have transactions that make up our NAV, rather than valuation models. And here is a data point also where you see that there's a transaction in the name that is sort of -- it was below NAV. Well, as you see in the figures here, it's like 20% below the NAV, of our valuation model at the end of September. But 20% below, not 70% below where our stock is trading. So as we increasingly start to get data points like that, I think there will be more comfort around our NAV. So that's a positive. What else? If we go to the next page, just as a -- our work here is really cut out to get our balance sheet to be debt-free. We've spoken about that at large, I think, over the course of the last quarters. But as a reminder, we have cash on the balance sheet in Swedish crowns to pay down the bond -- our bond that matures in June, this year, 2024. And we've used some of that cash to also sort of buy back that bond. And then the second bond, which matures in pretty much a year's time. To repay that bond, we have to sell stuff in the portfolio. So that's really top of the to-do list around at our end. And we're encouraged. We see transactions in some of our portfolio names, which is a good data point. And we're hard at work with several different conversations around building a cash pile by exiting some stuff in our portfolio. But obviously, it's -- we have always an eye on the pricing of this and won't sell stuff in our portfolio that has -- at any price. This is -- of course, that will be detrimental to our shareholder, of which [indiscernible] are very exposed. And so -- but that's how we do listen, that's what we're active in. I just wanted to highlight also that it's a little -- it may be a little bit difficult to sort of follow the movements of our debt. So there's 2 factors at work here. The debt is fixed in Swedish crown that we report in dollars. So when the dollars crown FX moves around that impact our debt. So of late -- or during this last quarter, the Swedish crowns, for first time in a long time, started strengthening versus the dollar, and that's been somewhat taken back after the year end, after the quarter's end, but that sort of made the debt in dollar terms bigger. But then we've also bought back debt, which has made it smaller. So those 2 factors are going on. And then over quarters, you could also have some -- if we bought back some bonds, if they're in a settlement period over the quarter, that's something to take into account also, if you try to follow sort of one piece of debt in one quarter compared to the debt at the end of the next quarter. So just be mindful of that. Our net debt is to the order of $110 million, as of end of December. So, I think that's a figure that one can use if I want to sort of build a rough [indiscernible] bond. I think that I'll stop there as an intro and leave it to Bjorn to so take you through some more details.

Thank you, Per. Going to the next slide directly, Dennis. I thought I'll start with some repetition, NAV in dollars and at $5.09 per share, down roughly 6% in the quarter. And as I mentioned, as the portfolio is denominated in dollars and euros. The negative movement in SEK was larger to the order of 13.5%. If we move to the portfolio and the main drivers of the NAV, during the quarter, BlaBlaCar, largest holding, down roughly 2%, driven by primarily a lower adjusted peer multiple. The BlaBlaCar position represents approximately GBP 21 per share or 41% of the NAV, as per December 31, 2023. Moving on to Gett, is up 4% during the quarter, driven by slightly lower peer multiples as well and also a lower risk adjustment following the general macro recovery in ESL during the quarter. For example, both stock and local stock exchange and currency has recovered since October 7. Of course, the situation in the region remains volatile, and we track it closely. Gett represents approximately GBP 7 per share at the end of 2023. Number 3, Voi is down 9% during the quarter, primarily driven by lower peer group multiple and moped represents approximately SEK 6 per share at the end of 2023. In Angus, these 3 largest holdings represent approximately SEK 35 per share or almost 70% of NAV, as of year-end. And one other holding work highlighting as also per mentioned was Booksy, which was moved to revaluation based on the recent transaction of the quarter. It's down roughly 20% over the quarter and is marked now on the basis of this recent transaction. As per year-end, cash and cash equivalents amounted to down $43 million and an additional $3 million in liquidity management investments. Borrowings again amounted to gross borrowings to $152 million, of which $31 million or SEK 309 million is related to the '24 bond maturing the summer. It was originally a nominal amount of SEK 500 million. But as you can know from the report, we had both in Q3 and Q4, bought back and canceled part of that bond. In addition to that first bond, of course, we have the SEK 1200 million bond or $120 million that matures in Jan '25. So adding this up, net debt amounts to approximately $110 million or GBP 8 per share. I think I'll stop there with the main portfolio constituents. I'm happy to go into other companies during the Q&A. But with that, I hand back to you, Per, if you want to add something before we kick off the Q&A. You are on mute still.

Apologies. I was saying nothing intelligent. But I don't know. I think if we go to the Page 6, then is the portfolio slide, Yes, this is where I usually sort of stop and we can use the [indiscernible] basis for Q&A because there's no, again, uneventful quarter, in terms of things moving around, on an aggregate level, some movements here and there, but there's nothing large -- there's no large developments over the quarter. So I think, yes, let's move to Q&A.

Yes, I'll kick it off, we received some questions here. And to start with the first one, we can, I think, Per maybe you best answer this one on funding need in the existing portfolio. So how much collective funding is needed by the companies that are represented in the other equity investments before they reach breakeven? It's the question related to the other part of the portfolio essentially.

Yes, it's difficult to put down an exact number. We -- we -- in our liquidity planning, we have to the order of $5 million but in the aggregated portfolio that we were -- which we plan to invest, which we think is the interest of our shareholders to sort of to do. And we put aside that cash to be able to execute accordingly. So in that other part, it's -- there's the same kind of activity going on as in the larger parts, there's been a cutting of burn. There's been -- yes, so a lot of those companies have raised money and are in no large -- there's no sort of immediate sort of big cash burn, certainly not for us. There's been the odd sort of holding where -- which has raised money and we passed because we felt that the valuations were acceptable to be diluted at. And there are some very small ones that have also sort of really basically sort of restructured and gone to -- not quite gone to 0, but where we have been diluted because we haven't felt it was -- and yes, because there's no point of putting in more money. But that's all taken into account in terms of when we build our NAV. So anyway, long-winding answer to that, we don't -- there may be the odd sort of company there that will raise money. But it's -- we don't foresee that's going to be a drag on our cash position over the near term of this year, really. And that's a mix between the companies being well funded and some of them raising money, and we don't think it's worth putting money and those are very, very small holdings. And where we feel that the dilution is acceptable. Yes.

Thank you. And another question on potential funding inflows, you're right in the port, you're well advanced on several potential transactions. Could you provide some color around if this includes the top end of the portfolio or also the smaller names?

It's a mix. We have a couple of conversations that are -- that both involve some larger names, not the top top names, or the top name. But the -- but otherwise, there's interest across the portfolio, really. And obviously, there's been some speculation and in local press around a transaction in Gett, that newspaper article was done before the work started, before October 7. But I think we've said for some time that Gett is sort of in over time in a natural exit phase for us. And hence, that would be one which with stability around that part of the world, there we expect it to be renewed interest in that company. But it's across the portfolio really.

Thank you. And then another question here on Numan, I can take interpolating the valuation and multiples you're using it since a Numan growth has accelerated. Can you please comment? And I think from what we write in the report, growth has increased at Numan, and they're performing really well and especially around this vertical of weight loss and here Numan cells? What part of the progress is around this GLP-1 agonist that Novo Nordisk. Novo Nordisk has been in the news for very effective treatment for weight loss. So that's the main driver of their growth acceleration. Another question here around funding. If you cannot sell companies, have you built the ability to extend the debt?

Yes. I'd say Plan A is to do some exits in the portfolio and retire the debt, and I'm fairly optimistic around that. But I think maybe one shouldn't say plan B, but obviously something that can be well, call it Plan B, is to roll the debt, which our brother sister [ cutting ] company invested very recently, they decided to roll their debt in the autumn, I believe it was, that was maturing a little bit later than us. But -- so -- but they decided to roll their debt, for another 3 years. So I think that's a good pointer to that, that's entirely possible.

Thank you and then there's another question here on Gett and their performance in this volatile environment. And maybe just to clarify in the portfolio, we do note that here in the end of Q4 on the activity basis, they were up above like 80%, of the run rate, they had prior to October 7. We also note that despite this volatile fourth quarter, came in ahead of budget for the full year. And we expect continued earnings growth for 2024, to give a short highlight on Gett in that aspect. All else, we have questions here. There's a question on Voi, Dennis around tenders and outlook. And also a question on the depreciation of the scooters, maybe you could provide some color on both of those.

Yes, sure. Happy to. So with regards to tenders, I think let me scroll to that question. I think the question on the tender -- tender pipeline for 2024. The largest tenders so far that we are aware of is actually Oslo, which Voi has already won. So that's actually good news coming into 2024. Oslo is the most profitable in scooter market globally or it's believed to be and that was announced at the beginning of January, and Voi has won that tender. In terms of other tenders, it is -- well all tenders are not announced until -- when we look at the pipeline, we have, for instance, Berlin. We have Barcelona, as 2 examples that are big cities, but they are not confirmed yet. We believe that will go up for tenders. But it is not 100% confirm that they will go into tendering during 2024. But that is where kind of -- those are probably the 2 biggest ones outside Oslo so to speak, that Voi has upper graphs during the year, together with the [indiscernible] citizen, of course, as well. I think the second question is around the depreciation rate. I assume, the question here is roughly what share of revenues. So basically, the difference between EBITDA and EBIT. And I think you're looking at -- so the question, what depreciation rate is used for the Voi valuation. And obviously, we don't -- since we value Voi on the back of sales multiple, we don't look at EBIT, EBIT still negative, but it's in the order of call it, 10% to 20%, probably around 15% a year like 2024. This will decrease over time. That is believed, but that's roughly where we are this year.

Good. There are some follow-up questions on Booksy and on the transaction happening there and how we look at that, maybe you can follow up on that.

Yes. So all these companies have different shareholder agreements for sort of govern what if -- how -- if you can sort of tag along to transaction or stuff like that, and in the case of Booksy, that is -- that has -- so it's limited in what you can do if someone finds a buyer for their stock. You can always buy, but we're not in a position to buy right now, as you understand. But we note with good -- with it's noted that the Booksy is doing really well, as a company and has good growth both in sales and earnings is EBITDA positive. And that, of course, attracts interests, which and the one transaction has happened. And the shareholder agreement hasn't sort of doesn't automatically allow you to sort of sell alongside. People, but it's -- I think it's a good pointer, nevertheless, of interest in that company.

Potential final question. As you note, in the management report, normalized cost base will come down by some 25%, following the cost rationalizations and reorganizations, well done. Could you provide some more color on that?

Yes. On a cash basis, our run rate is now something like $6.5 million, and that can go up and down a little bit and depending on stuff variable, but it's to that -- I think that's a good sort of cash figure to sort of have in the back of your mind, when you try to analyze how much this cost -- company costs in relation to NAV, et cetera, so around $6.5 million.

Which is down since we've had -- we've had a series of colleagues that have departed. And so now we're tied to teams and at a reduced sort of cost level.

You're ahead of the question. So I don't know if -- does that conclude the questions? Or do we have -- should we -- is there some final ones that we should address that we haven't addressed.

I'm looking here and I think we've addressed most of them. So I'd say we do conclude now. And if we missed a question or 2, please reach out, and we can take it off-line and happy to help. So Per, please.

Thank you. Thank you, Bjorn. Yes. No, so we'll conclude here, and thank you so much for joining. And as Bjorn said, please reach out if there's anything we haven't covered or that you feel that we haven't elaborated on, we're very happy to help if you reach out directly. And otherwise, happy New Year and looking forward to 2024, lots of activity in our space, which I think will be beneficial for this portfolio and us, as shareholders here. So I'm very excited about this year. But we'll talk to you all when our next report is out, which is when -- first, you'll see us producing annual report, those accounts won't be much different or at all different from the ones we've seen now. There will be some more notes as per the usual sort of standard. So that's out in April, bjorn?

The Annual Report is out on February 16.

February 16. We are quick on that.

And the report for the first quarter of 2024 is out on April 23.

So that's the first quarter of '24, apologies. Yes, Annual Report quite soon. And then Q1 report out in April, and then we have our AGM in May. So I think that's the -- that's now the housekeeping stuff. We'll end on that note. Thank you, everybody, and speak to you in April, if not before.

Thanks you.

Thank you.