Bambuser AB (publ)

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Good morning and welcome to Bamboozler Q2 2023 report. I'm Mariam Garamani, the CEO, and I will hold this presentation together with acting CFO Jonas Lagerstrom. Today's agenda will cover a short company introduction for people new to Bamboozler. We will then move over to Q2 highlights and finish off with SaaS KPIs and financials. Bamboozer is the world-leading video commerce company. We were founded in 2007 by offering a video technology that lets users stream live video from their mobile phones. We pivoted into video commerce in 2020 and have since then attracted over 350 brands across 45 countries. We have a global presence in New York, London, Paris, Tokyo, Turkey, Dubai, and Stockholm, where we have our HQ. We have since the start delivered a strong ARR momentum. We're currently facing a tougher market with some SME retail customers churning and enterprise customers with twice as long sales cycles as we have seen before. This has slowed down our ARR momentum. As we said before, the transition to the focus on enterprise accounts will result in volatility between the quarters before we have reached a critical mass of enterprise customers representing our ARR. We are very positive about the long-term growth of our ARR. The world is changing, and it's changing fast. Today, most e-com sites are static. meaning that they only have text and images to describe the products. However, we're all interacting more and more with video today. I'm sure that you in the last 24 hours already have consumed some sorts of video with FaceTime, Zoom, YouTube, or any other services. It is only a matter of time before video becomes standard in e-commerce. The evolution to video is unstoppable. Video commerce, sorry, Bamboozer offers shopping experiences that taps into today's behavior around video. With Bamboozer, our merchants can 10X their conversion, repurpose the content by using snippets from the show in social media, on product landing pages, or even use existing videos and make them shoppable. We also reduce returns. The customers are making more informed purchases, And as a result of that, we see decreased returns among our customers. Video commerce is the future and something that already has a significant presence in China. The western part of the world is five to seven years behind China, where we notice a massive GMV growth and general adoption. We have addressed the market opportunity. and estimate that the global addressable market is over 250 billion SEC and growing. The market is wide open with low penetration. Our core market opportunity is estimated to be over 9 billion SEC. It consists of larger companies being present in the regions and verticals we currently serve. Bambuser is the leading SaaS company in the video commerce space and well positioned as demand grows over time. Bamboozer is present across the globe with over 350 brands, and we're proud to have some of the best in-class merchants using our video commerce platform. We are thrilled to launch Bamboozer as a unified video commerce platform, combining our one-to-one and one-to-many products. This platform powers analytics and incorporates AI and machine learning features. Being e-commerce platform agnostic, we seamlessly integrate with leading platforms like Salesforce Commerce Cloud, SAP Hybris, Magento, Shopify, Commerce Tools, and more. Our customers can ultimately stream to top social media apps. Merchants can now connect with their customers through browsers or custom apps using our SDK. We aim to build an entire ecosystem around this platform with other services connecting to us. It's a game changer for video commerce. Our product suite offers two key products. With One2Many, our flagship driving over 90% of our ARR. It enables seamless interaction between hosts and multiple viewers, effortlessly starting from your smartphone or external cameras. Viewers can actively engage through chat and likes during the show. The One2Many solution includes full support in terms of promotion and add-to-cart functionality. Our core strength lies in using the merchant's native checkout, a crucial step in achieving the highest conversion rates. One-to-many seamlessly integrates with the customer journey. Our other product is one-to-one, enabling face-to-face conversations between end consumers and brand representatives. It's ideal for verticals like beauty and consumer electronics, where personal advice drives purchase decisions. We also see a demand in complex purchase journeys like automotive and luxury. One-to-one features an in-traffic shopping layer, seamless integration with native add-to-cart and various booking and CRM systems. Okay, so now please let me walk you through some of the Q2 highlights. We successfully acquired new customers. such as Ligo and Cozy and renew and expanded customers such as Shiseido, Sisley and Bloomingdale. We are very excited to launch our new one-to-many player. We have taken all of our learnings since our start and developed the next generation player that drives 3.5 higher click-through rates in the shoppable videos. We have designed it for enhanced product interaction on conversion, and with a mobile-first approach. Our customers can now reuse videos on their product detail pages by jumping straight to the relevant products. Bamboozer can finally allow our customers to multistream their one-to-many content on Instagram. The merchant can now amplify the engagement by reaching a wider audience. By this, we are now covering all the top social media platforms, including TikTok, Facebook, to name a few. We are very proud to welcome Cozy as a customer. Cozy is one of the largest beauty groups in the world, and their brand Addiction is first out to try one too many. They are in good company with the rest of the world's leading beauty conglomerates. This truly cements Bamboozle as the industry leader. We continue our initiatives to become a more efficient company with a leaner cost base. As a part of this transformation, some of our colleagues have left the company. The annual cost saving amount to approximately 32 million SEK. Due to these changes, we are sunsetting Bamboozer Plus. The function of production, strategy, and education are being integrated into our customer success teams and our growing network of partners who will support us globally at scale. The remaining part of Bandager Plus, influencer marketing, will begin operating as an independent company under the name Relatable during the third quarter. During Q2, we introduced a new pricing model that acting CFO Jonas Lagerström now will talk you through.

Good morning, everyone. The reason why we introduced a new pricing model was because the previous model was flat. Many customers felt that the price was too high before trying out video commerce, meaning that it was harder for us to land new customers. Once the customer's adoption and value started to grow, we had difficulties growing our ARR. Now, by introducing the new pricing, our customers commit to an annual usage allowance, such as number of videos or calls. We can land them for a low allowance and by that, a lower price. And as they grow their adoption and value, we can also grow our AOR by moving the customers to a higher allowance tier, which over time will be great for our net revenue retention. We will basically capture more opportunity in both the land and expand phase. We believe that this will be a game changer for our future growth and retention. The initial feedback has been very positive. Pricing is less of a concern in customer negotiations, and we have also won back several shared customers. So that means that our SaaS business model now looks like this. Onboarding and setup is a one-time fee and not included in the ARR. We estimate that this will decrease over time as we start to work with system integrators and agencies who will take care of this part. allowing us to scale more customers with less FDs. The customer then pays a price for the video commerce platform. The price is dictated by the service tier, for example, pro or enterprise, which is mainly differentiated by service levels, access to our SDK, or other typical enterprise-grade features. This is included in the AR. Then the customers commit to the annual usage allowance, which can be calls, viewers or videos. When they burst their allowance you have to move up to the next allowance tier and pay a higher price or pay an overage. It is in the license for you for committed usage where we will see the ARR growth over time. The overage is charged in arrears and not a part of the ARR. Okay so now we have gone through the pricing I will now guide you through the SaaS KPIs and financials. Excuse me. The AR growth was minus 2% year-over-year at constant exchange rates. The quarter-by-quarter growth was minus 12%. The new business was slower due to a challenging market with longer sales cycles. APAC saw small churn but higher downsells whereas Americas and EMEA saw equally large churn amounts during the quarter. The churn is not satisfying, and actions have been implemented to improve churn over time, including the new pricing, enhanced customer success, and better ideal customer profile mapping. But as pointed out earlier, it is important to stress that we expect volatility in the ARR as we build up critical mass of enterprise customers. Our net revenue retention was affected by the weaker quarter, but we see a strong momentum amongst the larger enterprise customers, which is a very good indicator of what our ideal customer profile looks like and where we should play going forward. The number of customer groups declined quarter over quarter due to churn has already been addressed. The average ARR per customer group was up 14% year-over-year. It is however reasonable to believe that the average ARR would go down in the short term but return to growth long-term due to the new pricing. Now let's look at the ARR by region. APEC grew 11% year-over-year with traction in consumer electronics and fashion. EMEA and Americas experienced a more challenging quarter even though Americas contributed to most new business for the entire group. Our product mix is more or less the same quarter over quarter. One to many had a tougher quarter due to challenges in Americas and EMEA, but APEC demonstrated growth by 13% year over year. One to one had strong support from EMEA this quarter. Moving over to net sales. The overall net sales were down 1% year over year, but most importantly, the net sales for SaaS was up 5% year-over-year. As we are making changes in our professional services by sunsetting Bambusa Plus and let the influencer marketing division operate more independently, it's fair to believe that the contribution from professional services will increase over time. The SaaS gross margin decreased with one percentage point year-over-year. As we allocate Our technical support teams and parts of the customer success teams in the cost of revenue, this quarter was affected by some of the one-time costs associated with the efficiency measures that we took during the quarter. The same goes for the gross margin of the professional services that was affected by the same one-time costs. The adjusted EBITDA continues to develop well and is the result of several initiatives that we have taken in the last nine months. We continue to focus on cost control this quarter and have taken further efficiency measures resulting in annual cost savings of 32 million SEK that we expect to reach full effect in Q3. That has resulted in one timely of costs that have been recognized in Q2 by 6 million SEK If we exclude these costs from the adjusted EBITDA, the adjusted EBITDA is even better, showing a margin of minus 48.6%. And finally, the cash flow. A free cash flow continues to improve, and even if the coming quarters may come with some volatility, the underlying trend looks positive. A direct result of our cost-controlled and approved ability to charge customers up front. The cash balance was 324 million SEK, which we consider sufficient, taking us to positive cash flow. Thank you for listening. We're now moving over to the Q&A session, where we are ready to answer your questions.