NowVertical Group Inc.

Good morning, everyone, and welcome to Now Vertical's first quarter 2023 earnings call. My name is Glenn Nelson. I'm the Vice President of Investor Relations. With me on the call today, I have Sasa Grujicic, Chief Executive Officer, Aleem Varani, our Chief Financial Officer, and Andre Garber, Corporate Development and Legal Affairs. So after markets closed yesterday, we did issue our Q1 2023 press release with our MD&A, our financial statements, and supplemental slides to accompany this call, all of which can now be accessed on our investor relations section of our website at ir.nowvertical.com. For the record, this call is being broadcast live at 9.30 a.m. on May 31st, 2023. A replay will be available on our website following the conclusion of the call today. And during the call, we will make statements related to our business that may be considered forward-looking under securities law. These statements reflect our views only as of today and should not be regarded as representative of our views of any subsequent date. We disclaim any obligation to update these forward-looking statements or the outlook. Before further discussing the material risks and other important factors that could affect our results, please refer to our filings that are on CDAR. Today, all figures or most figures will be discussed in non-IFRS basis, unless otherwise noted. And after today's call, we will refer to those. You can refer to those nonspecific IFRS measures, which are included in our press release. During the call today, You may ask questions during the duration of our prepared remarks in the Q&A section. And we will be taking calls or questions after the following prepared remarks. And so with that, I'd like to pass the call over to Sasha.

Thanks, Glenn. And good morning, everyone. So as Glenn mentioned, my name is Sasha Grudzic. I'm the incoming CEO of NowVar. I've been with the company for about 18 months now, and I've served as its COO, building up the operating model and helping to organize the business for scale, and was most recently promoted to president and overseeing all of our business units. Since joining the company in December of 21, Darren, the outgoing CEO, and I have been working on a succession plan and specifically looking at transition over the course of our working together and identified today as being that day. And the announcement of our strong Q1 2023 financials was a great opportunity for us to be able to make this announcement. So Darren is stepping back from his duties as CEO, as well as stepping down from the board. Myself and one of NOW's co-founders and EVP of Corporate Development and Legal Affairs, Andre Garber, will be joining the board. Elaine Kunda, one of our existing board members, will be taking over as chairperson of our board. And Darren will remain as a special advisor to the board, lending his immense talents to us via the board on our go-to-market M&A scale-up and will continue to be a constant and long-term ambassador of our story and of now. Darren is a huge supporter of the entire team that he's put in place here at NOW, and he's been a huge supporter of me. I'm truly thankful to him for this opportunity and wanted to now take us forward, pardon the NOW puns, and talk a little bit more about Q1. Since becoming a company for a little more than two years ago, we've done a lot. I mean, we've ramped up our operations to build significant scale and position now to compete and work with some of the biggest and most well-known technologies and practices around the world. We've built this business with 12 acquisitions that all in generated approximately $60 million of revenue in a full year of 2022. And we've done this with a really strong and dedicated team that's internally sourced, pursued and closed these 12 acquisitions. We are becoming a scaled offering in the market. We're over 600 employees. We cover all time zones and we're delivering solutions to some of the world's most difficult problems. What we do is we activate data analytics and AI capabilities within our customers' environments. It's all about deploying the right data, the right technologies, and the right processes that's specific to the verticals in which that they operate. And we do this by solving the critical bottlenecks to AI deployments. That's data, risk, returns, and resources. The bringing together of our global group with our differentiated offering is what we call vertical intelligence. All the critical ingredients to be able to bring together to activate AI in industry and with our customers. The way in which that we do this is we sell our VI solutions that are comprised of our people, our own technologies and third party technologies to do this. Our outcomes are things like predictive pricing models, supply and demand optimization for power generation, first party customer analytics and propensity analysis, data discovery and governance. All of these things are critical inputs and outputs in the world of AI and industry. We're very focused on this and our group is dedicated to becoming a global leader in this sector. So looking at Q1, I mean, there's a ton to be proud of here. On the revenue, we came in a little ahead of what we were targeting, and that's credit to the great balance of customer expansion that we had. Net new wins across industrials, commercial services, public sector, and consumer goods are verticals in which that we target. Our new revenue operations team is doing tremendous work across the global group to generate cross-sell, upsell, pipeline development, sales trading, all to accelerate commercial integration across our group. We're deeply embedded with our teams and our units to be able to drive enhancements in the way in which that we source and expand and expand revenue and work with new customers. Jumping quickly over to GP, strong margin across our global group with increased use of our global delivery model that can now cover all time zones. Tons of opportunity for improvement here across the group, but we're really, really excited about the early results that we're seeing from our focus and our work here. On adjusted EBITDA, and Aleem will dive into a little bit more detail on this shortly, but our first quarter generating positive adjusted EBITDA is a huge result for our group. And as we push for further improvements across our units, our operating model, our ultimate target is going to be free cash flows, net of all debt service, earnouts and taxes, which is what we're really focused on as a part of our operations. Right now, adjusted EBIT is a strong proxy for us, and it's a way in which that we're going to continue to measure our success in the way in which that we acquire and integrate and operate these companies that join our global group. As was the case with any operating company that grows through acquisitions, we're always looking at cost efficiencies across the group to be more efficient in the way in which that we work. In Q1, we identified just under 600K of annual savings, and our team is comprised of really disciplined operators from companies like Constellation, Brookfield, and we apply similar types of rigor across our global group, regardless of what country in which they operate. I'm going to hand it over to Aleem Varani, our CFO, who's going to dive into a little bit more detail. And I'll come back and offer some more commentary on Q1 and our forward-looking plan.

Thank you, Sasha. What we've provided here is a breakout of the financial performance of our business units and our operating models. Our business units are essentially the acquisitions that we've completed over the last year. 24 to 30 months. The view over here, as you can see, compares the performance as of March 31st, 2023 to March 31st, 2022. So you can see the tremendous growth that we've achieved over the last 12 months, which has been fueled by seven acquisitions. As Sasha pointed out to, pointed to revenue in Q1, 2023 hit 13.7 million. growth rate compared to Q4 2022. The revenue in 2023 included three new acquisitions that we had closed during the quarter. The revenue that these acquisitions contributed to the total was a partial month as they closed within the quarter. So we expect to maintain and improve on this specific run rate. With regards to gross margin, as Sasha pointed out to, we had 6.2 million, which is a 45% margin. If you think about specifically what's driving the gross margin, a lot of our businesses are service centric, hence this cost typically relates to utilization and billings of specific resources. And we see an opportunity here to mobilize our global delivery model. to really see improvements in the gross margin. And this is something that we'll touch on a little later in the presentation. With regards to profitability, our business units are performing at approximately 14% EBITDA for Q1. which obviously, comparing to Q1 2022, given the nature of the profile of these businesses, this will move around quarter over quarter. But the admin and other expenses is an area that we look at very closely for each of the acquired companies. And we're always looking for ways to make operations more efficient as they further integrate within the now umbrella. I want to speak a little bit about the operating model and essentially this covers a lot of the compliance tax legal costs that we incur to operate a public company, as well as the infrastructure that we're building to help scale the organization. A lot of the focus within this group is around, is commercially oriented as well. As you know, we have teams that are dedicated to either development of product or focus specifically on organic growth. So the idea behind the operator model is that we expect these costs to remain relatively consistent as we continue to scale our operations. We're also looking very closely at our compliance costs that fall into this bucket and are finding ways to minimize those. Q1 was a little high given we had just gone through an auditor transition in Q4 and the costs associated that are a little lumpy in Q1 as well as a couple other one-off expenses related to finances and whatnot. So we do expect these costs to be trending downwards in coming quarters. So with that, I'll pass it off to Sasha to give an overview of a few Q&A highlights.