Bambuser AB (publ)

Good morning, and welcome to Bamboozer Q3 2023 report. I'm Maryam Ghiramani, the CEO, and I will hold this presentation together with Acting CFO, Jonas Lagerstrom. Our agenda includes a quick company introduction, an overview of our Q3 highlights, and a dive into our SaaS KPIs and financials. Thank you for being here, and let's begin. Bamboozer is at the forefront of the video commerce industry. Our journey began in 2007, initially providing a groundbreaking video technology that allowed users to stream live video from their mobile devices. In late 2019, we made a strategic pivot into the world of video commerce, a move that has since then drawn in more than 350 prominent brands spanning across 45 countries. Our global footprint now extends to key locations such as New York, London, Paris, Tokyo, Turku, Dubai, and our lovely headquarters in Stockholm. Since the beginning, we've been achieving strong ARR growth. However, we're now facing a tougher market with customer churn and longer sales cycles among our enterprise clients, affecting our ARR growth rate. We remain very optimistic about our long-term ARR prospects. given the significant market opportunities ahead. Our world is evolving rapidly, and this change is inevitable. At this moment, the majority of e-commerce websites remain static, relying solely on text and images to showcase their products. Yes, our daily lives are increasingly connected with video content. I'm quite confident that in the past 24 hours, each of you has engaged with some form of video, whatever through FaceTime, Zoom, YouTube, TikTok, or other services. The shift towards video becoming a fundamental element of e-commerce is not a question of if, but when, and Bamboozer is leading this transformation. Bamboozer's shopping experience taps into today's video-centric consumer behavior. We enhance conversions by a magnitude of 10, You can reuse content effectively by integrating show snippets across social media, product landing pages, and transforming existing videos into interactive shopping experiences. We also reduce returns. Informed customer decisions lead to a notable reduction in return rates. Video commerce represents the future of retail, and it's a trend that has already gained substantial traction in China. In the Western world, we find ourselves roughly five to seven years behind China in terms of massive GMV growth and widespread adoption. This gap highlights massive potential that Bamboozer is tapping into. Bamboozer operates worldwide, serving over 350 paying customers, and we're proud to have some of the best merchants using our video commerce platform. We have also seen expansion in our partnership network, and we anticipate that this will play an increasingly influential role in our ARR growth in the future. Since the last quarter, we offer a video commerce platform, including both one-to-many and one-to-one, and that platform comes equipped with advanced analytics and incorporates AI and machine learning features. We are platform agnostic and seamlessly integrated with popular e-commerce platforms like Salesforce Commerce Cloud, SAP Hybris, Magento, Shopify, Commerce Tools, and more. Additionally, our customers have the ability to simultaneously stream on major social media apps. Merchants can now engage with their customers through web browsers or custom apps using our SDK. Our vision is to create a comprehensive ecosystem around this platform with other services connecting to us. This represents a groundbreaking advancement in the world of video commerce. Last quarter, we introduced a new business model that now centers on a committed usage-based pricing. It's been very well received, allowing customers to start with a lower allowance and as they grow, upgrade to higher tiers. This approach benefits our ARR and improves customer retention. Now, please let me guide you through some of the key highlights from the third quarter. We achieved successful acquisition of new customers, including Renova, Mini Cooper, and Guerlain. Additionally, we renewed and expanded our relationship with existing customers, such as LVMH and Shiseido. We're excited to have Mini Cooper join us for their pursuit of enhancing customer engagement through video commerce. Their goal is to leverage the Bamboozer platform to enrich the Mini community as they expand into new markets. This partnership is a significant milestone for us in the automotive industry. Cybex has chosen to strengthen its partnership with Bamboozer, expanding to 12 markets for the launch of their exclusive capsule, La Parisienne. This expanded collaboration reflects the trust and success of our existing relationship. We're also very pleased to announce that our one-to-many solution now offer password-protected shows, fulfilling a long-standing customer demand. These features open up the doors to exclusive shopping events and master classes, enabling our customers to create a unique and secure experience for their audience. As previously communicated last quarter, we have phased out Bamboozer Plus since those services are now available through our expanding global partner network. Additionally, as of August, Relatable has been operating independently under its own name. Given our current focus on developing a world-leading video commerce platform, we have initiated a strategic review of Relatable. This review may include a full sale of the business. I'm now leaving over to Jonas Lagerström, who will present the SaaS KPIs and financials.

Good morning. The AR was minus 13% year over year. at constant exchange rates, and minus 5% quarter over quarter. New business continued to be slow as a result of the challenging market with longer sales cycles. While churn is still not satisfying, it was heavily reduced by 60% quarter over quarter in absolute numbers. If we look at the net revenue retention, we continue to see a strong momentum with our top accounts, confirming that we should continue to spend time with that kind of customer profile. The number of customer groups increased from the previous quarter, but witnessed a decrease when compared to previous year. The average ARR per customer group declined by 4% year over year at constant change rates, which was anticipated. We have confidence that in the long term, this will rebound driven by our new pricing strategy. If we look at the regions, EMEA and APAC was both down 5%. In the Americas region, we faced a notable negative impact during the quarter. This was primarily due to a number of contract negotiations with customers that didn't complete on time, leaving them out of contract by the quarter's end. I'm happy to report that we successfully finalized several renewals in Q4. The overall net sales were down 9% year-over-year, and the net sales for SaaS was up 1% year-over-year. The SaaS gross margin saw an increase of 3 percentage points year-over-year, which aligns with our expectations of an enhanced gross margin. The gross margin for professional services demonstrated a notable improvement increasing by 9 percentage points year-over-year. We anticipate that this margin would continue to strengthen in response to recent strategic adjustments. We would like to highlight the OPEX this quarter. As we have been working hard to improve our numbers, and our OPEX showed impressive improvement by 13 percent quarter-over-quarter and a substantial 22 percent improvement year-over-year. These positive changes were primarily attributed to the reorganization efforts that we conducted last quarter. However, it's important to note that currency effects have had a negative impact on OPEX this quarter. When we adjust for these currency effects, OPEX reveals even stronger results with an 18% improvement quarter over quarter and 25% year over year. Our adjusted EBITDA naturally showed significant improvement as well, rising by 9 million SEK year over year. It's worth emphasizing that the corresponding period last year was positively affected by capitalized work for own account. When we adjust for this item, the adjusted EBITDA improved by 14 million SEK year over year. The free cash flow was minus 33.6 million SEK and affected by a negative networking capital, primarily resulting from Q2 garden leave accruals totaling 7 million SEK. Nevertheless, our closing cash balance stands at 292 million SEK, sufficient taking the company to positive cash flow. This was the end of the presentation. And we are now inviting you to a Q&A session.

If you wish to ask a question, please dial star 5 on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star 5 again on your telephone keypad. The next question comes from Nikola Kalinowski from ABG Sundal Collier. Please go ahead.

Yes, thanks for the presentation, Marian Jonas. Just a few questions from my end. Could you perhaps break down the Q3 churn in your customer categories? How much is related to large enterprise accounts and SMEs, respectively?

Thank you, Nicola, for that question. I would say it's a mix of those two categories this quarter. So the majority still represents SME, but there are absolutely a couple of what we would consider larger customers there as well. But not the biggest ones, but that you would not consider SME.

just want to add to Jonas also as we have a couple of the largest one as we also told you in the presentations that we have been renegotiating with you can also see a lower how to say station and then they come back in the next quarter if we haven't managed to renew them directly after the contract ends yeah okay yeah that's helpful so what you're saying is that there is

Maybe a chance that one of these larger enterprise clients that technically churned during this quarter Q3 could potentially come back during Q4.

Yes, that is correct. If we don't manage to renew them back to back, then we will have a gap. And then also with the new pricing, you can see a lower ARR as we are moving into a value-based pricing, which is of course much better for our customers as they will grow with us. You will see a lower ARR on those customers coming back again into the ARR buckets.

Yep, that's helpful. And would you say that the sales cycle and project lead times have changed in any meaningful way compared to Q2?

I think we're seeing the same. Sales cycles being longer, more decision makers being involved in signing off a budget. But I wouldn't say it hasn't moved in any way. I think it's the same as the last quarter.

Yep, perfect. And I think you highlighted in your report that additional cost optimization efforts are on the horizon. I understand that such efforts may still be in a planning phase, but could you perhaps give us a hint what those efforts relate to?

Yes, so the ones that we mentioned in the report, that was 5 million SEK, that is attributed to office leases. And that is confirmed. And beyond that, we are working on additional savings. Nothing that we are ready to communicate at this point, but you should expect some additional savings on top of that.

Yep, understood. And just the final question. You listed quite a large number of clients here that were renewed. Have all of these clients renewed under the new pricing model?

The majority of them, yes. There are still a couple of customers with legacy contracts that, in all honesty, may be more favorable for them. So that adds a bit of a challenge for us to renew them under the new pricing model. But the one that has material impact for ARR we have been able to move over to the pricing list.

Do you see a chance that you will still have the legacy pricing model under a transition period so to speak that you won't completely phase it out?

I mean let's be honest here we need to look at we just need to do business here. So if there is a hard pushback from some customers to not accept our new pricing and they are having a fairly high flat fee, we need to be a bit pragmatic and see when they can move over. Our ultimate goal is that all customers should be on the new pricing plan within, say, 12 months. But there is always these sort of exceptions where you need to have discussions. So I would say in roughly 12 months, it's our firm belief that we will have those customers on the new pricing plan, but we need to be a bit pragmatic in between.

Yep, sounds good with that pragmatism. Thank you very much for the answers.

Thank you.

As a reminder, if you wish to ask a question, please dial star 5 on your telephone keypad. The next question comes from Forbes Goldman from Pareto Securities. Please go ahead.

Yes, thank you very much for that. I have a couple of questions. And first of all, I'd like to start with the market. Could you perhaps give some color on your thoughts on your customers' willingness to spend on the products that you're offering? And sort of if the sentiment is bottoming out now or if it will bottom out further ahead. and also if there is a discrepancy between the different regions because, for instance, your ARR in EMEA increased sequentially this quarter. So just a few comments there would be helpful.

Thank you for the question, Forbes. I think overall the market is once again wide open, huge. I think the sentiment is quite good and we saw some before I would say until the summer it was quite a tough market. I think the market has bounced by quite good I would say after the summer. We have a quite healthy pipeline and I think that brands that are interested in adding video commerce to their experience, website and store, and really create a great omnichannel experience are in the pipe. So I would say that the demand is quite high, higher than for a long time. I think what takes time is really the decision-making, Everything goes quite slower as the world is what it is right now. So I think to your question, the market is quite good, but everything takes quite longer time for us to close. But once again, as we said in the presentation, this is how the consumers are moving and the brands need to adjust. But as we all know, adoption takes time. To your question along the regions, I think that as we have a quite small office in APAC, and in APAC area we're mostly focused on retention on the bigger clients we have there, so we don't work too much new business in that area. So if we have very small churn, that will affect our growth there. Also in EMEA, we have most of our larger accounts in EMEA. So upsell is easier here than in the US. US, it's harder to upsell, like the bigger accounts are one brand, one country. So I think that EMEA, that is why EMEA grow a lot also under this quarter. It's because we have most of the bigger accounts for upsells based in EMEA region.

Great. Thank you. And a follow-up on the market and zooming in a bit on Q4 perhaps. Do you expect normal seasonality to be the same this year with higher new business compared to previous quarters this year and perhaps also higher churn? Or how are you seeing things?

So I think that even though we would love to see seasonality, I'm not sure we can say that we have established seasonality. COVID was very dominant the first two years when we did a pivot into this space. And now also, as you know, the market is a bit upside down since then with other things happening around the world. I'm not sure we can sort of rely on seasonality, but what we do know is that in the retail vertical, there will be very few customers that would start with their e-commerce, video commerce journey during Q4 because they have a code freeze on their e-commerce sites. They do not want to have any interruptions during this very important holiday season. However, that does not mean that we cannot sign the contracts. but those contracts would typically then start to generate AR in Q1. So we are in a lot of sort of negotiations at the very moment, and they will likely be signed in Q4, but the AR will start to count first in Q1. So I think that's what we can say about next quarter. But yeah, I think I stopped there.

Excellent. Thanks. That's interesting. So I have just a few more questions. Operationally, you've previously highlighted how many streams your customers are uploading and posting. Could you give us some comments on this, how that development is looking and how It's been on a quarterly basis this year.

So that is right. We did that a couple of quarters ago. I think the reason why we no longer present them is that it's not a true answer to success and also that it can be very volatile through the quarters that would require further explanation why it is. It could be that Some customers are doing very big things or having super events or that there are certain customers that are trying new tactics. But I can tell you that the underlying trend in terms of the adoption across our platform is very positive and that it sort of keeps a steady pace with growth where we would expect it to grow. But we believe that we need to reach more of a critical mass in number of customers and views and shows before we can start to show and share that number again.

Perfect. And then my final question is on the strategic review and potential sale of Relatable. If you could tell us some more about the expected timeline of this and who a potential buyer could be.

yeah so I don't think we can establish a timeline like a firm timeline at this point but I mean it's it's when the decision is taken obviously you want to execute as soon as possible so whether this is something that happens in q4 or in q1 or if it for whatever reason would would be a longer one that's that's we will see what happens. But I mean, it's reasonable to believe that there will be some sort of movement in Q4 or Q1. In terms of buyer, Relatable is a great company, great team, great offering, also performing fairly strong in this market sentiment. So there are many, many either like smaller PE companies or other agencies that could be a potential taker of this company. But as you know, the market sentiment is what it is also when it comes to investments. So it's obviously tougher to divest something in this environment, but we are certain that we will find a new good home if that's what happens for relatable with a new good owner.

Excellent. Thanks for taking the time. Bye.

Thank you.

Thank you very much.

There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Thank you for listening in and goodbye.