NowVertical Group Inc.

And welcome to Now Vertical's earning call for the fourth quarter of our fiscal year 2023, which ended on December 31st of 2023. We'd like to first off, thank you for your patience. Our intention was to release this on the 29th and at the request of our auditors for some extra time, as they were working through some of the complexities and volume around our acquisitions in 2023, they needed a little more time to complete their review. My name is Glenn Nelson. I'm the Vice President of IR at Now Vertical. And with me on the call today is Sandeep Mandirata, our Chief Executive Officer and Director of Now Vertical. He's been in his role since 2024. Before joining Now Vertical, he led Acrotrend, for 15 years, which was acquired by now in 2023 and was one of the most profitable businesses within our portfolio with a 35% EBITDA market. He spent 25 years in the data and analytics space and has held key roles in Metric Sphere, Deloitte and Datamatics, sorry. Also with us is Christine Nelson, our interim CFP financial officer. She's been with now since 2022 and previously served as our vice president finance. Prior to joining now, she held the position of finance director at Brookfield Asset Management. And lastly, we have Andre Garber, who is co-founder and chief development officer here with Now Beautiful. And they'll all be with us to answer questions at the end of this call. So before markets opened yesterday, we issued our press release with details regarding our fourth quarter results, which can be accessed on our website at nowvertical.com. A replay of this call will also be made available following the conclusion at the same place. During the call today, we'll make some statements related to our business that may be considered forward-looking. These statements reflect our view only as of today and are subject to a variety of risks and uncertainties that could differ from actual results. A further discussion of material risks and other important factors that could affect our actual results. You can refer to our filings on CETA and also during the course of the call today, we'll refer to certain non-IFRS measures. The reconciliation of those IFRS to non-IFRS are included in our press release as well as our MD&A. After the prepared portion of the call, we'll take questions and answers. And so there's a button at the bottom of your screen that will allow you to put your questions in here. And with that, I would like to turn the call over to Sandeep. Good morning, Sandeep.

Thanks, Glenn, and a very warm welcome to everyone. I'll just run over the agenda and the four key areas that we are going to be covering today in this webinar. For the people who are joining us new, I thought it would be a good idea to cover the overview of NowVertical and just give you an idea of what we do and how our clients experience the work we do for them. The second area is going to be 2023 financial updates. And Christine, our interim CFO, is going to be taking us through the detailed metrics from the 2023 financials. And then 2024 financial strategy. What I specifically want to cover here is our cash position as the business coming out of 2023 and how we are dealing with that in 2024. And finally, just wanted to give you some color on how the operating strategy that we are bringing into 2024 is shaping up. That's the agenda. And with that, I'll go into the now vertical overview. Just addressing what is the market that we are operating in. If you look at the prediction, the AI market is expected to grow pretty large and fast. It's over 35% category in the next five to six years, which is phenomenal. This is, in our opinion, one of the largest waves of the technology transformation that we are experiencing and about to experience. Now, what's happening because of that technology wave that we are having, and this is about to disrupt pretty much every industry and every market that we have on this planet, And because of that, what's happening is there is a lot of pressure on the enterprises. There's a lot of pressure on the CEOs. And as we see here, 70% of the CEOs, they have already heavily invested in regenerative AI. And they see that for their own industry as a competitive edge in the future. So that's quite an interesting metric. And because of the pace at which the technology is evolving and it's changing the industry, the pressure also is on the CEOs to demonstrate the return on their investments in next three to five years and demonstrate the value to the shareholders as well. So that's what we are riding. But as it happens in any kind of technology transformation, the enterprises are overwhelmed. Most of the times they struggle to really maximize the value and the return from the technology. And that's what is happening in the data and AI space as well. And to be fair to the enterprises, they are focused on running their own business and taking care of their own business model. Data and AI may not necessarily be the core focus for them. And what we are experiencing is about 36% of the AI projects fail. They fail to deliver any results or ROI. And 85% of the AI projects are slowed down by the organizational limitations. And these limitations actually stem from different areas of the business. But the point is, how do these enterprises look at the AI projects and move them into their core strategy drivers of the business? What we see is the data is growing. There are data complexities in the business. Data is growing in volumes and complexity. And the rate is about 39%. And because of that, the other problem enterprises are facing is about 73% of them are struggling with the data silos. So that's the data complexity that all the brands, all the businesses are facing in the world. And whenever we have the technology adoption, there is always very large emphasis on how knowledgeable or what kind of skills and expertise do you have to go through that transformation with the technology. And what we are experiencing is about 82% of the organizations do not have the expected knowledgeable staff to work on the big data projects and manage and handle that data. And even in the cases where the organizations have the capability, a lot of them are already overwhelmed. 97% of the data engineers and the data scientists are already burned out. And this presents different level of the AI complexity as well as to how enterprises prepare themselves to leverage the technology transformation that we are going through. And at the same time, the AI and the data transformation, they are also changing the way in which organizations operate and structure themselves, right? So that brings in the organizational complexity, not only from the knowledge base they need to carry, but also how do they structure themselves and leverage the technology properly. And this is where we operate. Now Vertical brings in the capabilities to solve the data complexities, the AI complexities, and the organizational complexities together. And we are right at that intersection where we are capable of bringing in the return on investment from their AI investments. How we do this is we help our clients transform their data into business value with AI. And we do it really fast. Why we are able to put in this claim that we do it fast is because we have done it for many different industries. We have delivered different kinds of results. We have worked with different departments and functions in various industries and geographies. And we have the proven method, we have the proven track record of delivering successful projects, helping the businesses either through their transformation, maybe a large transformation, or just helping them build the capabilities and stand with them strong so that they can see the success from their investment. Some of the examples I just want to bring up from the large set of clients that we have. Adobe, for example, a giant in the technology industry, we have done some work in their marketing department and it delivered 39% increase in customer lifetime value. For the size of Adobe, that's massive. Raisin, one of the large energy companies in Brazil, what we have been able to do for them is creation of their internal data market, if you like, which helped them democratize all the insights and created the foundation for the AI projects to be delivered on that data market. Nuranka X, you know, this is in Argentina. We delivered 80% effectiveness on the next best action prediction. Blinds2Go, a very large global online retailer of the blinds. And we have been able to impact their customer services department by improving their customer experience and bringing cost-effective operations to the forefront. The Economist, as you know, is a media giant. And we have done a lot of work over more than three years with The Economist. And one of the things we delivered for them was 27% increase in first-year subscriber retention. Technocom in the manufacturing industry, 40% reduction from the computer vision solution from their 4T production. These are just some of the examples of how our clients experience the work we do for them, which is quite phenomenal. And in many cases, it's quite mission critical for their growth and in some cases, the cost reduction as well. Just a certain insight about how Now Vertical has grown. We IPO'd in July 2021, and since then, in the last three years, we have acquired 12 really phenomenal businesses across the globe. That has brought us more than 600 people across five continents. So very strong team, very strong capability, and it's coming from various acquisitions that have done, so brings in some great assets to the business. We have been working with some of the industry standard cloud platforms like Azure, AWS, Snowflake, Google Cloud, and there are many others. What we have got as base is a portfolio of 250 plus clients across our business, which is really a significant portfolio for our size of the business. Out of that, we've got about 100 plus clients that are key accounts, as we call them, and they are the enterprise large brands. You see some of the names on the slide here, Sky, Disney, NHS, LATAM, Airlines, Informa, GlaxoSmithKline. These are some of the clients that we have worked with. So I'll stop here and just hand it over to Christine. I'm here to answer any question about Now Vertical later on, as Glenn mentioned in the Q&A section. But I'll hand it over to Christine right now to take us to the 2023 financial update.

Thank you, Dan. Thank you. And thank you everyone for joining today. So I'm going to start off by just going through some select highlights from our Q4 2023 and fiscal year 2023 results. So in Q4, our revenue was 10.1 million, which is a 20% increase over Q4 2022. And gross profit was 6.3 million, which also is about a 62% gross profit margin, a 75% increase over Q4 2022. Adjusted EBITDA was $0.8 million, which is a 358% increase over Q4 2022. For the fiscal year, we had $51.7 million of revenue, which is a 91% increase over 2022. Gross profit was $26.6 million, which is about a 52% profit margin and 130% increase over 2022. And adjusted EBITDA was $5.4 million, which is about a 378% increase over 2022. Obviously, we're all proud of all these large increases year over year. However, we do want to address our revenue numbers for Q4 2023 and for the fiscal year. just weren't as high as expected. And there are some specific reasons for that. And we just wanted to hit them right off the bat and make sure everyone was aware of these. So the first situation we had is in 2022, we acquired 4BI, which for the majority of it, the revenue is from Argentina. And Argentina is a hyperinflationary economy. So we expect a devaluation of their currency every quarter. which we which we include in our forecasts and generally it's offset by an increase in their inflation. However, in Q4, there was a major change in the government there, and this resulted in a 131% decrease in the Argentine peso from Q3 to Q4. So it went from 349 in Q3 to 805 in Q4. Now, under IFRS, they require us to restate our prior quarter results So anything that's in within the same fiscal year. So that means we had to restate Q1 to Q3 results using that Q4, that December 31st exchange rate. And we're also required to record that entire adjustment in the current quarter. So we can't like push it back and restate the prior quarter results. So when you see the 10.1 million, we just wanted to highlight that this is not representative of our real run rate because it does include a 4.5 million FX revaluation related to Q1 to Q3. So without that and pushing that pro forma back into the actual quarters that it relates to, really our run rate for Q4 would have been 14.6 million. Then there's another adjustment as well to address the $51.7 million. So in 2023, we acquired a company, ATEN, which operates in LATAM. And a significant portion of their revenue is reselling licensed subscriptions. Now, when we had acquired this company, management had determined us to be a principal under IFRS guidelines. which means reporting revenue growth and advertising it over the period of this description. Well, throughout the year, we really dug in deep into the contractual arrangements and also through conversations with EY or auditors, we came to the conclusion that actually we're an agent. And this means two things from an accounting perspective. It means number one, you recognize revenue at the point of delivery because we don't own the IP or the key. As soon as we deliver it to our customer, even if the subscription agreement is 12 months long, we record the revenue right then and there. And the second impact, which I'm addressing in the slide, is that revenue has to be reported net of costs. So we had a 5.9 million reallocation related to, you know, the entire 2020 year from costs of revenue to revenue. So this has a nil impact in our actual bottom line. So gross profit doesn't actually change. It's just moving the amounts from cost of revenue to revenue. And so without this reallocation, revenue would have been about $57.2 million. And then if you look at both of these adjustments in aggregate, so assuming there was no Argentine devaluation in Q4 and prior to adjusting this cost of revenue to revenue, our revenue would have been about $62.1 million. So next, I want to just walk through revenue quarter over quarter. So what you're looking at here is the dark blue is the reported revenue that you'll see in the MD&A. And then in the light blue, you'll see performer revenue, which has been restated for that Argentine devaluation in Q4, which I just spoke about. So we've essentially put the devaluation into the quarters that it actually relates to. And as you can see, as a result, our consolidated pro forma revenue is really trending positively. Every quarter it is increasing, which we just wanted to really highlight here. Next, I'll go over the same thing, but just with our adjusted EBITDA. So adjusted EBITDA is a non-OIFRS measure that we use to measure the performances internally of all of our business units. And so similar to the last slide, The adjusted EBITDA in dark blue is what you see in the MD&A, and then the adjusted EBITDA pro forma is adjusting that FX impact into the appropriate quarters. So really similar story with revenue, but really trending positively, going from a 0% margin in Q1 up to 13% in Q4. And overall, we have a 10% EBITDA overall throughout the whole year. So Q3 was a little bit of a big, a little bit increase there. We had a larger contract that occurred, but overall trending really positively. And, you know, the impact, you know, one of the focuses that managements have and continues to have is reducing overhead costs, both corporate and at the BU level. And as you can see, like the work that we've done is really, we can be shown this in our EBITDA analysis here. And there's even more opportunities for us to do this. And we're really focusing on this in 2024. We want to focus on increasing these margins, reducing costs wherever possible. Next, I just want to just kind of just address quickly kind of our revenue mix, what it looks like, what markets, what it's made up of. So we are in primarily two markets. About 62% of our revenue is in North America and MEM markets, and then about 38% in LATAM. In North America, this also does include a significant portion of U.S. government contracts as well. As for what we're offering to our clients, about 80% of our services and solutions, and then 20% is licenses, maintenance, and other SAVs. And so this 20% includes that license reseller revenue that I spoke about previously. It also includes our SAV sales of the product that we've actually, you know, we own the IP, we generate internally. So that's included there as well. And with that, I'll hand it back to you, Sandy.