This conference call transcript was computer generated and almost certianly contains errors. This transcript is provided for information purposes only.EarningsCall, LLC makes no representation about the accuracy of the aforementioned transcript, and you are cautioned not to place undue reliance on the information provided by the transcript.
spk02: Good morning and thank you for standing by. Welcome to the Q1 FY 2021 Financial Results Conference Call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1 on your telephone. If you require any further assistance, please press star 0. I would now like to hand the conference over to your speaker today. John Abrams, thank you. Please go ahead.
spk05: Thank you, operator. Welcome to this discussion of Venzi's first quarter 2021 financial results. My name is John Abrams. I've led Venzi Technologies as president and CEO since late 2019. I will provide a company overview followed by a financial review from our CFO, Darren Battersby. The earnings released referenced on this call as well as the associated MD&A can be found in the investor section of our website, investors.venzi.com under the CDAR filings link. Today's call may include forward-looking statements about Venzi's future performance. Actual performance could differ from what is suggested by our comments today. Information about the factors that could affect future performance is contained in our CDAR filings. Our call today represents a milestone in the growth of Venzi. Today, I'm very excited to have the opportunity to share with you the results of our 2019 operational pivot. A pivot away from a negative margin consulting business to a high profit software as a service offering that is unique in the market and leads the next wave of supply chain technology disruption across global retail. My remarks today will generally follow our updated investor presentation available in the investor section of our website, as mentioned previously. There are three things I want you to know about Benzi. First, we are a disruptive technology in the global digital supply chain space. Our tech platform replaces slow, limited capacity manual processes with infinitely scalable, smart tech in the form of augmented intelligence, machine learning, and even early stage artificial intelligence or AI. Second, we are growing rapidly and on track for more than 2,000 mesh connector sales this year. And in line with that previous goal made public over the past year, as much as six times connector sales growth next year or 2022. Third, we offer large brands, our target clients, a scalable SaaS model tech platform at an attractive pricing model, an attractive price point designed to increase adoption and drive revenue growth. I'm passionate about applying research and technology to solving real-world problems. And as some of you may know, I've lectured and taught supply chain and tech in some well-respected schools over the years. So if you'd indulge me a little bit, And let me provide some brief but academic framework around how the global consumer supply chain has changed since the 1940s. Back in the 1940s, there was, following World War II, there were demands placed on supply chain. In fact, they came to a point with the Berlin Airlift where folks needed to be able to move a large amount of material into Berlin and needed very efficient ways to do it. So the idea of a standardized set of supply chain attributes, attributes are things that describe a product. A standardized set of attributes was created. It was called EDI. And EDI allowed hundreds of different attributes, things like size, weight, what the product is, to be communicated very efficiently. And today, even, we have companies like Sterling Commerce, now part of IBM, SPS Commerce, traded on the NASDAQ, and OpenText, also traded on the NASDAQ. These are large companies who have built their entire corporate framework on EDI technologies. So that's 1940s technology. To be more specific, 1948. The next wave of supply chain technology emerged in the 70s. 1974, the first pack of gum, Wrigley's Juicy Fruit Gum, received a barcode. The companies and academic consortium that came together to form the standards and foundations to allow barcodes to be applied to products really needed a bunch of attributes, more than what EDI provided, in order to create unique identifiers for products, in order to create a barcode. That concentration of effort resulted in global standards, or GS1, as they're now known. And it formed a number of companies. One World Sync, now owned by Battery Ventures, GladSyn, which has become Syndigo and owned by the Jordan Company, and Salsify, which is in a pre-IPO condition right now. Those massive companies really are the foundation coupled with the first wave of EDI. Those companies are the framework, the digital framework for what governs all global trade today. The third wave, doesn't pay much attention to a limited set of attributes as we found in the first and second wave. The third wave, and Venzi is the only company in it, we deal with unlimited product attributes. So when people talk about the digital aisle or the digital shelf, the number of attributes that consumers want to interact with through mobile devices, through all sorts of different means, all of those needs driven by consumers are only satisfied when you have truly unlimited product attributes. Venzi has been architected and built and designed to accommodate an unlimited set of product attributes. Venzi was built to provide vendors with easy product attribute distribution. That is our core. Vendor easy or Venzi is intentionally architected and designed to make the communication of any attribute to any endpoint, retailers in particular, easy to do. So brands, the people we go after for clients, they can simply connect using our smart tech platform. And what they get out of that is the ability to sense, map, and send unlimited consumer-facing product attributes to any retailer anywhere on the globe. We offer our product to large consumer brands either through partnerships we've established with companies who provide tech already in large brands, or we sell directly. Either way, our product is the same. We call it a mesh connector. Those represent proprietary SAS model revenue generating growth. We build out those mesh connectors based on client requests or because we know that a particular retailer is valuable in the marketplace. So somebody like Walmart or Amazon, a very valuable destination or Flipkart or Alibaba. We architect and build those connections and that is what we sell. We sell a connection to a retailer. The fact that we can build out those retailers based on client requests faster than any legacy solution is a key competitive advantage for Venzi and a stable advantage as our competition is typically rooted in the technical architectures, as I mentioned, of the 1940s with EDI frameworks or the 1970s with database-based synchronization, so data pools that you may have heard of. Our intelligent tech architecture provides us a durable advantage over our competition And this is interesting. I'll bring it up later. We have had zero churn to date. So when clients come on board our platform, they stick with us. We are a one-step product setup solution for brands. So in the legacy solutions or the solutions of the 1940s or the 1970s, you really need a lot of people to massage and manage product attributes. Those teams of people interface with teams of people at a retailer. What Benzi does, we take the people out of the equation. So we tightly couple our product, our technology with the client's technology. And we also connect on the other end to the retailers digitally using APIs wherever possible. Because we are taking people out of the equation, we can scale endlessly. We can deliver any attribute and we can do it much more quickly than anybody in this space competitively. One of the things about today that I'm most excited about is we are now talking publicly about the key performance indicators that tell us that what we're doing is needed, is valuable, and is getting traction in the market. When we made our pivot in 2019, technically we had to change some things so that we could add retail connections more quickly. And we have done just that. So in early 2019, we had two retail connections. And so we had a very limited pool of things to sell. We only had Shopify and Bed Bath & Beyond. After we made some technical investment, we were able to increase the number of retail connections available. We moved up by the end of 2020 to around 14 connections. By middle of 2020, we were at 145 connections, and today we sit with over 400 connections available on our platform. What that does is allows us to generate sales, so we build our pipeline. We are a very digitally managed sales team, so we use HubSpot as our mechanism to record and follow our sales pipeline. And in 2020, somewhere after first quarter, we had somewhere around 100 opportunities in our pipeline. We moved by the end of the year to over 400 opportunities in our pipeline. Today, we sit with 5,000 opportunities in our pipeline and intend to double that by the end of the year. So by adding retail connections, doing the digital technical work to allow that to happen, we've been able to increase our sales pipeline. Pipeline needs to convert, and we are doing that. At the beginning of 2020, we had but a couple of connections. So a couple of sales sold mesh connectors. We moved by the end of 2020 to about 65 sold connectors. And today we sit at about 675 sold connectors. Our goal by the end of the year is to be over 2,000 sold mesh connectors. Those are often discounted. We discount at up to 70% during a six-month what we call adoption program. That adoption program allows our clients to build their processes around our technology. That becomes very sticky. Over that six-month period, we move those clients off of their discount model into a full paying model. And so far, we have seen two things. One, we haven't lost any clients, so we have zero churn. Certainly a good thing for a SaaS model company. And the other thing is that our revenue is, in fact, ticking up in line with our six-month adoption program window. So where we had two mesh connectors sold in early 2020, by early 2021, we had $6,000 in annual recurring revenue that was on the books. Today, and Darren will talk more about it, We are over $8,000 in mesh connector revenue, and we intend to be over $195,000 recurring by the end of the year. Those numbers do equate to a strong performance based on our sold mesh connectors. Darren will get more into the details, but the model is working as we expect. To give you a little bit more detail on what a client who has built their operational processes around us means, we do have what we call a lifetime value calculation. So what we look at is a brand and the number of connections that they can consume on our platform. Today, they can consume over 400 mesh connectors. If we apply an artificial lifetime of five years, which may be a very limited lifetime, that Single brand connected over 400 connections results in $6 million of lifetime value. So large brands do perform in our model and are significant. So our approach of creating a program where during a period of time we get a commitment, we get their process built around it, and they stick with us, It is all for a very specific goal of mining lifetime value. Last two things I want to talk about, the Venzi team. Our Venzi team is well curated. These are folks who I know from the industry, and they sit on our board and on our operational team. Almost all of the people on our operational team have been in this business and have been part of an acquisition of some kind or have sold a company in this space. The reason that's important for two things, and really my last point, there is a lot of activity in this sector. Salsify out of Boston is considering an IPO this year and has made another purchase announcement just recently. Some of our partners have gone public in Canada. Some are continuing to grow investment in states, but there is a lot of activity. And at this point, really, I'm at the end of my prepared remarks. I trust that the three points I made at the start of my remarks are clear. We are necessary disruptive technology in the global digital supply chain space. We are growing rapidly and on track against the aggressive goals we laid out in 2019 as we pivoted to a high margin, high tech driven business. And finally, that we have traction and momentum in capturing and retaining large global brands using an attractive pricing model designed to accelerate our platform's adoption and drive revenue growth. As well, I really do hope that my enthusiasm for the business we are building comes through. To close out the prepared portion of this call, I'm going to turn it over to Darren Battersby, our CFO, for more discussion of the financial details.
spk04: Thank you, John. Yeah, going to the results for our quarter ended March 31st. Just taking a look at the revenue, we had $8,700 of revenue compared to $25,000 last year. Again, this is still part of the pivot that John had mentioned that we initiated in 2019 and was prevalent in 2020. First quarter was cleaning up a lot of the customization work that we were doing on the individual clients. This model has been abandoned, and now we're on the SAS model, where, as John said, we are starting to grow the revenues from a modest base, but anticipations are to grow and scale as the year goes on. Operationally, our costs went from $655,000 from the previous year to $417,000. We had switched when we, in 2019, started reducing our overhead and our burn. That's where a lot of the people with the pivot reduced all our overheads. So reflective of Q1 2020 was a pretty scaled-down version of Benzene. Throughout 2020 and into 2021, we have increased operations, added personnel, and focused our efforts on more sales and marketing investor relations, and slowly building the overhead, scaling the business. What that resulted in was a net loss for the quarter of $657,000 compared to a loss of $147,000. The biggest change in that really is the booking of share-based compensation with some of the options and incentives that were issued by the board during the quarter. So from a cash perspective, it's a fairly even quarter compared to what it was last year. This all gave us basically a zero earnings per share comparable to the last quarter too. Assets, we have about $2.4 million of assets primarily that is cash that's sitting on the books except that March 31st. And, you know, looking at the operations, you know, we – The results basically were from the change in the pivot as we gained some momentum and going through the changes in the operations. One of the things to note is your cost of revenues. Still on a very marginal basis, but it's important to note that work that we have done in the past because of the labor intensiveness was really done on pretty much a nil or negative margin basis. The model that we've employed now is going to be on a much higher margin basis, not overly reflective in Q1, just because we do have a certain amount of overhead that we do have to cover in the cost of revenues, primarily posting charges and those kind of fees. So my anticipation is as the year progresses, those margins will become much more prevalent. Um, also important to know, I think, uh, during the quarter we received, uh, over a 1.3 million us in funds. Um, this is primarily from warrants that were exercised, uh, giving us a lot of support from the, uh, from our shareholder base. Um, I think, uh, also touch on where our capitalization table sits at this point. Um, our common shares, we have 20, 226 million outstanding warrants, 111 million Stock options, $14 million, and we recently issued some performance-based compensation to the sales team. Another $3.5 million restricted share options units. Total fully diluted, we're at $355 million shares outstanding. Gives us a market cap of approximately $30 million. And based on, like I said, on the performance of zero loss per share. We have seen growth in our pipeline opportunities. We are on target for what I think is a good year for Venzi, relatively speaking, growing the revenue base and the partnerships. I'll hand it back to John now for concluding remarks.
spk05: Thanks, Darren. I really appreciate your effort and the thorough detail that you and your team apply to our financials. We don't have further prepared remarks. We will open up the call to investor questions, and that will be moderated. So we will continue. And our formal results now. Thank you for your time. We look forward to interacting and talking with you, whether it's through Q&A or please reach out to Venzi directly. And if you have questions on our results, on our goals, on our expectations, we are always happy to engage and get into more detail at your request. So thank you very much. And back to you, Operator.
spk02: Great, thank you. As a reminder, to ask a question, you will need to press star 1 on your telephone. To withdraw your question, press the pound or hash key. Please stand by while we compile the Q&A roster.
spk03: Hi, John. It's Arlen here. I had a question emailed in just while we wait for this to be compiled. Really, we've seen some emails come in about the River Sand Syndigo acquisition, what's happening overall in the industry as a whole. Can you point to some trends that you're seeing across competitors and the brands and the retailers?
spk05: Yeah, just real quick on who both of those companies are. Syndigo is a Chicago-based company. They've been around for many years, originally a catalog operation, so photography. And they've been backed by the Jordan Company, a private equity firm out of Chicago, who's put in probably north of $100 million into that company and reformulating it. They've been on a very aggressive buying spree. Their most recent acquisition is a partner of ours. In fact, Riversand as a product information management company, or a PIM, they were our first partners. So they built out integration with us so that they could do distribution using our platform. So most PIMs and master data companies do not have distribution. So you can manage the information very well within the four walls of a manufacturer, but you can't distribute it. And that's what we do, and we do that very well. what i believe is happening is many of the pims and there are hundreds if not thousands of them depending on size river sand is a gardener and forester rated pims so they're sort of high end which is why they were one of our first partners we went after them specifically but what you're going to see is some more consolidation in this space so more of the pims being acquired by the three major content management players, One World Sync, also out of Chicago, Salsify out of Boston, and Syndigo, also out of Chicago. So the space is getting consolidated. That's, for us, a very good thing because it highlights the fact that distribution is a needed asset. And if you've got modern distribution, you're in an advantage position. We know that based on the calls that come into us from people who are looking to see if we are for sale.
spk03: Okay, great. Operator, we can go to the questions in line here.
spk02: Certainly, thank you. You have a question from the phone line from the line of Keith Schaefer from Investing Whisper. Please go ahead. Your line is now open.
spk01: Thank you, John. Great update. Great to see some granularity. Thank you so much. Just curious if there's anything else you're willing to share in terms of like which verticals or industries is like, when you look at your, your, your, uh, pipeline growing, is it in a certain, uh, would you be willing to share, like, is it in a certain industry, a certain vertical? Is there a certain geography? Is there a certain size of company? Is there any trend within that company, uh, that your list that you're growing here that is, would give us any insight into where your business has the most value?
spk05: Yeah. So great, uh, question, Keith. Um, You may know, and some folks dialed in may know, I come out of health care most recently. I was moved to get into this particular space because when I was at Cardinal Health and I commanded a good deal of resource there, I could not find somebody to help me distribute my product information. Cardinal Health is a hundred and some odd billion dollar revenue company. And yet I couldn't find a way to distribute my content digitally. When I was at Cardinal Health, I had 600,000 active SKUs in my area, which is a lot. SKUs are products. And so I got into this space from healthcare, recognizing that there was a huge problem in healthcare. The reality, though, is that healthcare is a fairly immature product area. So consumer packaged goods, where we play quite heavily, retail that is aimed at the consumer is a is an important area for us. Some of our salespeople come out of hard lines. So the hardware store products, things that are durable goods that are consumer facing. So we're really focused in that CPG. So things aimed at consumers and the velocity in that space, consumer driven purchasing is really high because consumers are looking at a product. We all experience this every day. you pull up a product on your phone and you're missing elements of that product description or it's described incorrectly or it's the wrong size. That all is due to the legacy approaches that have gaps in their distribution. So we don't have those gaps. And so being in the consumer goods section, apparel, you know, CPG, all of that, grocery products, Those are areas that are very hot right now, and we're going to stay in those areas for the foreseeable future.
spk01: Okay. Just one more quick question, if I could. Yeah, sure. Go. When you look at your business here over the last five months, you're really starting to kind of turn the corner here. When you think of how you would relate to the market, to your investor base, what size of – Company win or contract win or connection win would you consider putting in a press release? There's not a lot of news between the quarterlies. Now that you're starting to really get things juiced up and revving here, do you have an idea what they give your investor base as to what you would be willing to announce in between the quarters?
spk05: Yeah, so this – good call out. And this call today is particularly – exciting for me because we've talked about releasing KPIs regularly, and we've been talking about that for some time. The reason that we had not done it, we weren't quite ready to. We didn't have all of the pieces of the organization fully functioning. Can we release things and be comfortable that this is going to be something that we can repeatedly do? Can we measure it? Can we report on it? Can we grow it? So the KPIs that we're talking about today, they are generally lined up with SAS model revenue companies and the KPIs that those SAS model companies use. So we can do that now. We've been doing it internally for probably six months, and now we're doing it publicly, and this is a big deal for me and for the company. In terms of what we would announce on pipeline activity, meaning things that we're closing or that we've closed, we probably are going to start announcing those if they are significant, meaning they are in the pipeline now with requests of, say, 100 or 200 or 300 or more mesh connector requests. So if it wasn't clear in the call, We sell a very specific thing. It's called a mesh connector. That's what a brand, a manufacturer buys from us. It has a set price point and it is a recurring revenue model. So they pay every month for that. If somebody is buying one of them, that's interesting. If it's a big company, buying one may signal that that company is going to expand purchases over time. But we don't know that for sure. If they're already in our pipeline and they're saying, hey, we want 100 mesh connectors, we'll probably announce that when that closes. So we do have some that we have not announced that we are kicking around. You'll see more of that over the coming year.
spk03: Thank you. John, I've got another two questions here from a came in. where are you getting this pipeline opportunity from? And can you explain exactly what a pipeline opportunity is? You've gone from a thousand to over 5,000 in a very short period of time. And like, where are they coming from?
spk05: Sure. So pipeline, these are opportunities that our sales team is working. We don't have a huge sales team. So how, you know, how do you grow your, from, you know, we just had in 2019, maybe 100 different opportunities. Most of those back then and still today came from our partners. So partners who have product information platforms, so a river sand or similar, what they have is an established base of companies, manufacturers on their platform using their solution. When they come to us, they say, hey, We have these manufacturers and they have these needs. And as we qualify those in the sales cycle, we look at, okay, this brand wants a number of connections. How many do they really want? Are they ones that we can service? Meaning are they companies looking for retailers we're already connected to? So can we actually service them? So we go through a very intense qualifying process. if you will. We put those into our HubSpot CRM so we know and can track and know if the pipeline is growing or if a partner is producing good results or not. What we've gone very quickly from companies saying we'd like one to companies saying we'd like 50 or companies saying we'd like 100 or several hundreds. So that's the reason our pipeline is growing. We haven't really grown our sales team significantly. We've added a person. So we still have a very small, very talented group of salespeople. But what's happening is the partners are producing more clients with a larger appetite for mesh connectors. So that's why the pipeline has grown as it has. And we expect that will continue as our partners both expand and and deepen the relationship with Benzig.
spk03: Okay, thank you.
spk02: And if there are any further questions for the phone lines, once again, please press star followed by the number one. And there are no further questions.
spk03: I'm sorry. It actually looks like Wyatt popped in with a question here. We'll take that.
spk02: Great. Thank you. You have a question from Wyatt Roadhouse from PI Financials. Please go ahead. Your line is now open.
spk00: Hey, John. How are you?
spk05: Good, Wyatt. How are you?
spk00: Good. So do you want to give a little color on the discounting and the timelines associated with that? Sure.
spk05: Sure. Yeah, absolutely. So discounting we've been talking about for a while. We didn't really think we would need to do discounting. Our mesh connector price point is fairly low, and so discounting doesn't make a whole lot of sense on paper. But what it lets us do is have a discussion with a client that says, it's going to take you a period of time to adapt your processes and apply our technology to them. So it's not on paper this looks very simple. In practice, when you're working with a large brand, they're dealing with a lot of people in a lot of old legacy process that has to be changed. So it's really that change that we're working through. And what discounting lets us create is an incentive. It may be somewhat artificial or really a mental incentive that says, hey, work with us. We'll apply resource and talent and expertise to help you reformulate your process around the Venzi approach. So it's more technical. It's more automated. It can be, because of the speed, it can be a little scary. So something that could take a team of six months to do, you do with a push of a button with Venzi. And that's kind of frightening if you're used to a very, very long, drawn-out approach. So by discounting over a period of time, we give them some comfort that, hey, you can work with Venzi, it's not costing you anything or it's costing you very little, and you can build your processes in a safe way around the Venzi approach. that discount falls off over time. And what we're seeing is, and some of it is built into the contract, so it's no surprise, but the contracts and the expiration or the purchase new connectors at a non-discounted rate, it looks like it's about a six-month window. So from the time we sign a deal and they say we want X number of connectors, It takes, it looks like in our numbers, about six months for all of the discounts to roll off. So there is a window, if you will, of about six months from the time we start work with a client and they're paying us something till the point that they're paying us everything that our contractor or our rates require. So it's a little bit more of a gap than what we were thinking initially because we didn't think we'd need to discount. but it's had some really good results, and it results also in a relationship between that brand, that company, and our team that is really strong. They trust us with their data, and that's an important piece of a long-term or lifetime value equation with these big brands.
spk00: Okay. In your MTNA, there was a line, I think, on page four where you're talking about what happened in 2021, and you talk about the first quarter. In there, you talk about $2 million in revenue. Where does that number come from?
spk05: Very specific question. If Darren's on the line, I would toss it to him. He would know that exact line.
spk04: Thanks John, why not? Actually, I'll take a look at that and give you a shout back. I'm not. Maybe take it offline.
spk00: Sure.
spk04: OK.
spk00: I'm all good then I guess.
spk05: Thanks what?
spk02: And I'm not. And I'm not showing any further phone questions at this time.
spk05: I'm going to look at that, Arlen, as an indicator that collaboratively with all the good folks and you on this call, we've done an adequate job at expressing our quarterly results, showing KPIs that people can relate to, and explaining it in a way that there's not a lot of confusion, which is, again, a big deal for us.
spk03: Great. Thank you, John.
spk05: Thank you.
spk02: And this concludes today's conference call. Thank you everyone for joining. You may now disconnect.
Disclaimer