Way 2 Vat Ltd (W2V) Earnings Call Transcript & Summary

Good morning, everyone, and welcome to Way2VAT's company update for investors. Today, Way2VAT's Founder and CEO, Amos Simantov; and a Non-Executive Director of the Board, Rob Edgley will take you through today's presentation at the end of the presentation. We'll go over some Q&A. So please submit your questions via the Q&A function. Over to you, Rob.

Thanks, Dylan. Welcome, everybody. It's great to be here today in Melbourne, and it's even better to have our CEO here in the flesh instead of online overseas as we've seen in most times. So Amos will be in Australia this week, doing some investor meetings. As Dylan mentioned, whilst Amos is taking us through the presentation, feel free to put in some -- put in any questions you have. After the presentation, we'll get Dylan to read through those questions. And both Amos and I will take that opportunity to answer those questions. So without further ado, I'll hand over to Amos, and he will tell me when to move the slides as he needs it.

Yes. Good morning, everyone. Yes, we're really happy to be here today in Melbourne. So we had some announcements today. So we've probably been seeing that. But today, I will go over on a new presentation, a new strategy that we are implementing in the company. It's not like we are reinventing or rebuilding something from scratch, everything is based on the technology that we invested in the last 3 years. So we define it a bit differently. And therefore, I would like to go over and walk you through this new strategy. Next. So let's start and give some information where we stand so far. So we are executing a rigorous business plan to expedite the profitability. And our profitability is something that we are putting all our efforts and running through that in the last few years. I would say, this year, it looks more achievable. It looks like that we are in the right path getting there. So all the activities that we are doing, that we did recently, cutting costs, bringing new technologies, looking for new domains, even this new strategy that you will see today is focused on 1 -- and 2 main things: growth and profitability. We are very much would like to be profit this year. Therefore, all the efforts is around that item. So going down to the main items below here, you can see what we built so far. So we are the world-leading -- we are building a company to be the world-leading digital tax processing. And this is something that based on the technology that we invested in patents in the last few years. The product is based on AI. And when we are saying AI, it's all about timing of the AI today, and we see a lot of companies around that. For sure, Way2VAT is one of the main player in AI domain. But don't forget, we came with that solution with a machine learning computer vision 6 years ago. So we know exactly what AI means. So machine learning really helped us at that time to build our platform. Now we are refreshing that, moving that to new engine. It's straightforward, no-brainer. We are seeing the benefits of that. So it's a great timing for us moving the company to the AI domain. The market that we're addressing, as you know, I already discussed at the VAT/GST claim, it's about $20 billion unclaimed yearly. This is based on Ernst & Young figures. Now with the new domains or pillars that we will show you today, we're expanding the opportunity to about $187 billion yearly digital processing backed by AI technology, that means Way2VAT AI technology. So this is a high-growth market. And lastly and more importantly, this is -- 2025 is going to be the inflection point for us, inflection point in terms of growth and mostly to profitability. We very much would like to be there, and we're going to be there based on the actions that we are doing now. Next. So if we are looking now on this nice temple that we built here, so I will take you through from bottom to up. So if you look on the yellow side below, what we have worked so far in way we do that. We have a very strong human capital. People with rate us with full commitment, with different. Tel Aviv is the headquarter. We have DevoluIVA in Barcelona. We have a sales team running our European sales activity in London, and we have an operational team in Romania. Those guys with the R&D teams that we have both in Tel Aviv and Barcelona, these are the key guys for us, taking us to the next level. So human capital, it's all about the team and the people there. Technology. Technology that we developed in the last 7 years with huge investment. As I said, from machine learning, computer vision to AI today really can take us to build those pillars and move us to huge growth and profitability. And lastly and most importantly, I would say, is our existing client. Bear in mind that we are in an enterprise domain, we are just dealing with a very large client. Sales cycle is long, but once we are signing with very high retention. Today, we announced a contract with JLL. We're about to announce a new big one in the next few months. So all our clients, if you look on these 400, most of them are very large logos, and this is one of the assets that we are building there. So this is the baseline. It's the yellow, this is the baseline of this temple. Now I will go one by one of the pillars, and I will explain you. The first one on the left side is the VAT reclaim. This is our bread and butter. The second one is the APAI. This is one that we will -- a new version, new product that we announced about a year ago. And this is one of the future of this company. This product, the APAI online compliance will provide us the next generation of the VAT and invoice validation. Each pillar here have a full integration and connectivity to other. Therefore, we are looking for all the 4 together, we'll see the bottom line of getting revenue out of those 4 pillars together. The third one is the VAT compliance. And the VAT compliance, this is something that is new. This is something that it's about M&A. And this is something I will get you through and explain you in a minute. And the last one is the e-invoicing. E-invoicing is also a new pillar. This is based on technology that is existing. So all those pillars where we're taking from left to right, the VAT reclaim, the APAI technology and the e-invoicing is available today. This is something that we already invested in and it's something that is really just how to commercialize that and to leverage it in the market. The only main pillar that we'll go through in a minute is the VAT consultancy and compliance. This will come by M&A. So these are the 4 pillars. If we go up a level, we see all about 2 things here, we would like to have the growth through M&A strategy, really will help us with that pillar with VAT compliance, and we have now a candidate for that, and organic growth. So we are growing 40%, 50% yearly. We would like to keep this momentum. So in the end, it's AI unified SaaS platform. This is the new vision of Way2VAT. Next. Okay. Looking on the first pillar, you can see it here in the left. So what we achieved so far? So we reclaimed about -- in the last 4 years, we reclaimed about AUD 125 million, and this is a significant number. Our client should be very pleased on that. It's cash out from getting from Way2VAT to those clients, for money, for reclaims doing from -- of tax authorities. We are on the run rate of 1 million invoices monthly that we reclaim, so the machine can do that. It's very scalable, Amazon-based AWS, the technology that we are having. We are running in 40 different countries, 20 languages, so these are our one of core business. And clients, we have about 409 enterprise clients using our platform daily. We acquired in 2022 DevoluIVA. That's a very nice success story. When we purchased this company, it's been like $0.5 million revenue. This year, they will triple, probably take us to $1.5 million, and we see the growth of that company. And lastly is the AI tech. So AI technology is in our blood. This is something that we started as a first players in machine learning, and we're going to implement that in the next product lines. Next. So if we are looking on the existing business, bottom line, you'll see a nice growth. In the purple color at the bottom, you see revenue in Aussie '22 compared to 2023 and then 2024, taking us to AUD 4.6 million. In 2025, we are talking about a growth of 54% by existing last 2 quarters. We are showing a very nice growth here. Today, we are on the run rate, I would say, AUD 5.1 million but the idea is to go with 54% and more but maybe more for this year. So you can do the calculation by yourself. So in the end, we have an average growth nearly of 50% year-over-year. On the dark blue, you can see the number of the gross transaction, the VAT reclaim for client also in from Aussie from AUD 21 million to AUD 35 million. This year, we will cross the AUD 45 million, we get us to AUD 50 million in terms of the VAT reclaim. So these are the numbers. This is something that we build. This is -- no one will take it from us. It's one of the assets that we can take us to build the next pillars. Next. So the second pillar and one of the, I would say, newcomers is the APAI. This is something that we built in the last 12 months. Luckily, we started launching that. We call it a real-time invoice compliance validation. Why real time because we are moving that to the SaaS mode, the SaaS platform. Self-serve clients can use that by themselves. By the way, the APAI will use it for internal use as well. So when I'm talking about each pillar and the connection between the pillars, you will understand how technology is affecting here positively. So this pillar, we are looking on that. So clients will use it before getting or uploading invoices to ERP. This is something that we don't want the clients saying, CFO are you saying, we don't want to upload invoices with error. It's complicated for us to clean it backwards. So if we have a platform that can go online and by traffic light, remember we discussed all the time about APAI traffic light. Green is green, yellow need to be checked and red is hold. So we have this. It's online, one click. Clients can upload individual invoice, hundred of invoices or thousands of invoices in one batch and the system will validate that and give the right indication on each invoice. In the end, we are looking for all invoiced by VAT, invoicing rules with a full audit traceability. This is part of the solution. This is a patented AI technology that we have. And as I said, each pillar will use this APAI technology, you will see it in a minute. Next. So why now? So we developed this product, because we see the demand of the market, moving more to online technology rather to do it manually and offline. We're seeing a lot of players are doing that with different angles, but bottom line, a lot of human involved. We're trying to move the responsibility to clients and to move it to SaaS. This is also -- will help us with cash flow and getting revenue much more faster by a monthly payment from clients. And then when we are moving now and we are seeing that the new regulation is coming for e-invoicing, so this drives the market to more like online solution to validation. So as said, it's a real-time invoice analysis. We have high demand now. We are seeing clients looking for SaaS solution rather to look on a legacy platform like SAP or Oracle or others that they need to implement some solution. It's not fully online. They have to have people to support it. Projects like this in SAP or Oracle or more big ERP system can cost hundreds of thousands of dollars and the implementation can be months. And we are talking here about weeks to implement and the cost is totally different. So it's a big, big, big advantage to our enterprise client. And the evidence here that JLL, that we announced today, are going to use that. This is one of the largest clients that are going to use APAI, and this is the revolutionary approach when we came with that idea. Next. Okay. The third pillar. The third pillar, we are talking about VAT compliance services. And this is -- this pillar we are building that now. This will come mostly through M&A. We don't have this expertise in the company. We are not doing consultancy or compliance services. We are doing that, but this is part of ongoing business. We are not charging clients for that. In order to have one-stop shop end-to-end solution for Way2VAT to be the leader of that area for VAT/GST business, we should have this pillar in place. So in order to have it is M&A. We are in the process to acquire a company now in Europe. I hope we will finalize it in the next few months. And this really can bring us, top professionals guys can help us to first in the VAT reclaim. This also will have APAI to use to their clients for this company -- potential company we buy, and also for internal use, we will use it for internal use for efficiencies, for the compliance part. This unit that we are going to build, we use it internally as well. And also, we sell it to potential clients. So it's end to end. Again, as I said, you see the link between each pillar and why we are doing that and the sense behind it. When we are now moving to new technology, now all this Trump administration with tariff change, a lot of things, questions are coming with the VAT/GST issues. You have to have someone really to support those guys and help them and consult them what is the right way to support. And today, they either go to 1 of the 4 big players, Ernst & Young, PwC, Deloitte and others or they can use Way2VAT part of the entire solution. We can provide these services, and this is something that will come through a strategy. This is M&A strategy. This will come based on what we said all the time, we very much would like to develop this area. Next. Okay. So why this pillar now? So when we are looking, the VAT compliance is a key pillar for revenue generation across all products and I explained it already and vice versa. So we need to have this consultancy to help us to grow the business, bring us more revenue. We use, again, the APAI to support us. E-invoicing and ERP system integration update will offer a big online consulting opportunities. As I said, a lot of companies moving to invoicing, new regulation. There are a lot of questions. Tariff is part of it. So we are in the right timing to support this pillar. And again, as I said, this will come by M&A. Next. So let me walk you through regarding M&A. In the end, we are saying we need it, we call it one-stop shop. We have to have many, in the last few years I mentioned that. We started with the DevoluIVA. It's a very nice success story. I'm very happy for what we are seeing. Therefore, we have the appetite to acquire more. We are seeing the European VAT reclaim industry. It's very fragmented. We see the opportunities there. We see a lot of small businesses. They came through the debt and either they will get a huge investment to move from offline and human-based solution to online solution. And in order to do that, they need to invest millions or to sell their company. And we are seeing that demand of potential sellers really would like to sell in different territories in Europe. And we are there. We are working closely with our investment bankers. We have a deal on the table and we hope to implement it. It's a strong synergy to our business line to other pillars. It's not high risk. It's a low risk. In the end, what we are buying here, we are buying clients. We are not paying like 10x on revenue or something like that. Bottom line, what we are looking, and this is something that I'm saying loud and clear, we're going to buy companies that are profitable companies, not breakeven, not a few dollars here and there, substantial profit. This is the main goal. And this company that we are in process has a substantial profit EBITDA. And this is something really will help us to get to profitability as well. So we are gaining profitability. We are gaining market share. We are getting revenue, and this goes in line with our strategy in the next few years. Next. So the last pillar is the e-invoicing. Let me take you through the e-invoicing. E-invoicing is a new regulation in Europe, came in the last year. Country suffering a lot from a fraud of invoices. When you have a fraud on invoice, the country, the tax jurisdiction need to pay cash for the invoice. So it's $1 billion of loss for countries, each country in Europe, the main one, it's $1 billion there. So they're trying to avoid them by having one regulation for the e-invoicing for entire Europe. As always, in Europe, they are starting a big thing and then each individual country goes to different area and with different solution in e-invoicing. So within e-invoicing, with the deadline started already in 2025, and you see some countries already there. You cannot come and provide like a non-digital invoice for some of the countries. Should be certified, should go online to each invoice, should go online to the tax authority confirmation. And Way2VAT with technology that we already developed by the way, and it's on the shelf through DevoluIVA. DevoluIVA developed this technology last year for the internal use. We can take it and we can build a pillar that we can sell it to our enterprise clients. So this is the beauty here. Next. So if you are looking, it's a mandatory. You see the flags below. So countries that are already mandatory for e-invoicing, it's in Europe, you see Germany, Poland, Portugal, Romania, Greece and Latvia. Asia Pacific, you see Malaysia, Singapore, India and Vietnam. And in Americas, you see Brazil, Mexico, Chile, Colombia and Peru. So this is like a first, I would say, line of country that started it. The biggest country in Europe will do it in the next 2, 3 years. We are ready with the technology. By then, we have like one-stop shop end-to-end solution, and this is something that we're going to use in the next few years for our clients. Next. So why now? So the timing because it's mandatory. So we have to come with that solution. As said, one of the advantages of Way2VAT in the past for the international VAT reclaims, each country has its own regulation, so therefore, we came with our technology to bridge this gap. It's the same here for the invoices. Each country has its own regulation, different standards. And this is an advantage for Way2VAT to cover that and to bring our clients a full solution, although each country has its own solution or technologies. So this is first. Legacy tools no longer fit to that purpose. You have to have invoicing new technology to support it. And by having that, it's a one-stop shop. We will bring clients from reclaim to intelligent in one workflow, e-invoicing, it will be the last pillar to bring the end-to-end solution. So as I said, we are leveraging existing technology. We are not asking the market for more investment. For that pillar, this is ready, and we're happy to launch it shortly. Next. So in the beginning, I mentioned some numbers regarding TAM and we'll have to go and drill down the numbers. So in the left slide, you can see the $20 billion of the VAT reclaim. This is our existing business. And we go down for the invoice validation VAT compliance tech, it's about $17.2 billion in 2033. And then the e-invoicing. E-invoicing will take us to $58.5 billion in 2032. And then the VAT advisory market will take us to $91.5 billion market. So this is a huge market. When you are looking at companies in the end for investment, you'll see, okay, there is a market there. So Way2VAT, there is a market. We're seeing that. We understand the market is huge. I think it's all about execution. When it comes to tax, a bit slower than others classic or normal fintech companies. But once you are there, you are there for life. And I think, as I said, we are an inflection point. In 2025, we need to see that coming, profitability and growth. Next. So let me take you through the process that we -- through those 4 pillars. If you look on the left side, we have here a client. If the client using different technology now, so he will start with the bottom up. He'll with the VAT reclaim. And now if he have an issue and he needs to go to VAT compliance, probably it will be a different vendor. There is no connectivity integration between the two. If he goes to VAT compliance and then he needs to go to e-invoicing, the same problem, he can do it, but more human, it's offline solution, much more complex, more error. What we are providing is end-to-end from the VAT reclaim to e-invoicing through APAI and VAT compliance, one-stop shop, online, SaaS-based solution. So this is the future of Way2VAT in the next few years. Next. So as I said, we are moving to SaaS. It will be monthly cost for clients. This is the new ecosystem that we are building here, and we hope to get the support from our investors in the near future. Also happy to have some questions if the audience have. Thank you.

Okay. Thank you, Amos. That was wonderful. Dylan, from Automic, do you want to share any questions with us?

Yes, we've got a couple coming through here, Rob and Amos. So first one here or double entendre. What is the latest status with regards to [ NBD ]? And what is the likelihood confidence level for securing new contracts over the next 12 to 18 months? And also, has the business lost any contracts to date? And if so, what's the reasons and what are the learnings or the impact?

Okay. So Dylan, just slow down there. That was about 8 questions in one. The very first part, an update on what did you say in...

NBD.

Business development, BD?

No, they haven't specified. But yes, the investor can maybe clarify in the Q&A box about what NBD is. But yes, I guess, in the second part, what's the likelihood of your confidence for securing new contracts over the next 12 to 18 months?

Yes. Regarding security contract, we have a very strong pipeline. As I said, we are targeting just enterprise large clients. All the time, we said 1 plus 1. It's our buzz word. When we are saying 1 plus 1, it's a company with minimum 1,000 employees with $1 billion revenue. It's not easy. It's a long sales cycle. Just let you know, JLL, it took us about 9 months, even 12 months to close it. We have a very strong one, I would say. In terms of figure, we have about EUR 5 million pipeline to be closed in the next 12 months. So the pipeline is there. It's just about execution and closing that. Bear in mind that EUR 5 million that I mentioned, this is mainly for the VAT reclaim. APAI, we have also some nice demand for that, that we are starting now. This is the other pillar that I showed you. The third pillar for the consultancy, we need to acquire the company. So it's not part of the number I mentioned. And the last pillar, the e-invoicing, we will start launching this product in Q3 2025.

Okay. And has the business lost any contracts to date? And if so, what were the reasons and learnings from that?

In the end, we are in, I would say, a competitor -- competition domain, and we are seeing a lot of competitors there. We are not by ourself. I can say that we lost some minimum, but not something I can say a huge contract. It's something that we are working closely with our clients to improve and to learn about issues or mistakes that we are doing. Those, I can say that we lost mainly it was because of pricing, because the competitor came and asked for -- or came with different pricing structure. And we've been on the higher rate, so these are the main gaps that we have there. But in terms of service, we have been seeing any big issues there.

Amos, if I could just from my perspective, as a Non-Executive Director, there are various competitive tenders that we've seen the business participate in over the last 3.5 years since listing on the ASX. It's been very clear that when large companies do a comprehensive tender RFI, they take their data, they utilize their data in our platform. We show them how much extra VAT they're likely to claim, things that they've missed in other areas or using other platforms. And that's -- we've had a very good success rate. We've large clients who choose us. Many of them have said it's quite clear your platform is the most superior platform, technology platform in this area. And then you go into, obviously, commercial negotiations. And it's been one thing that has struck me right from the beginning is that when we're in a very big competitive tender process, we really lose. And if we do lose, it's usually someone trying to win the business through cutting their prices.

Yes, correct, correct. Next question.

Yes. So there was a reference to the integration with ERP systems, so that's enterprise resource systems. Is this already in place now? And if so, how much has it been adopted so far?

Yes. Well, do you want to explain it for everyone how our system is connected to the various ERPs?

Yes, today, we developed APAIs through different ERP system like SAP and Concur and a long list of accounting software. So this is in a bread and butter for us. We are doing that daily. So we don't see any risk there.

That's how we receive the data to process through the platform. So that connection is vital, and it's a big part of our business.