March 29, 2024

Earn Money

Business Life

Edited Transcript of IFM.AX earnings conference call or presentation 26-Feb-20 11:30pm GMT

Frenchs Forest, New South Wales Mar 20, 2020 (Thomson StreetEvents) — Edited Transcript of Infomedia Ltd earnings conference call or presentation Wednesday, February 26, 2020 at 11:30:00pm GMT

RBC Capital Markets, Research Division – Executive Director of Equity Research & Head of Australian Technology and Small-Mid Caps

E.L. & C. Baillieu Limited, Research Division – Equity Research Analyst

Thank you. Good morning, everyone. Thank you for joining Infomedia’s call to present our results for the first half of the 2020 financial year. Richard Leon, our CFO, is joining me this morning and will walk through the financial results for the 6 months ending 31 December 2019. The agenda for this morning’s call is outlined on Slide 3 of the financial results slide deck.

Before I go into our results on Slide 5, I would like to remind all of you who we are and what we do. Infomedia is a leading software provider in parts, service and data insights to the global automotive industry. Our aim is to support manufacturers improve their parts and service proposition in aftersales, the most profitable segment for automotive manufacturers globally.

Infomedia is one of very few global providers of parts and service software. Our parts and service software, combined with our data insights proposition, are unique globally, and we are very excited by the opportunities we are seeing in this space. We have 180,000 users of our software in 186 countries.

In a period of geopolitical uncertainty and slowing of the automotive sector, manufacturers are increasingly sharpening their focus on aftersales. We see a clear shift of focus and investment by our customers into the aftersales market. We feel we are uniquely positioned to support our customers in driving increased parts and services sales and improve customer satisfaction in the process.

Turning to Slide 6, a quick overview of the highlights for the first half of the 2020 financial year. I’m very happy to report another period of accelerated performance with good revenue, up 19% on the previous corresponding period. Cash EBITDA, which is a key internal metric for our business, increased 45% pcp, and earnings were up 24% pcp.

Infomedia is a cash-generative business. And since June ’19, our cash and cash equivalents increased 11%. We also have no debt. We do remain focused on driving innovation and customer service, and we are continuing to invest to capitalize on emerging trends and opportunities to disrupt in the aftersales automotive sector. The Asia Pacific region reported strong growth as a result of good sales and continued growth with Nissan. EMEA delivered a solid result, and whilst the America achieved modest growth. We have appointed a new regional head in Americas, and I anticipate that it will take about 6 months to gain real momentum in that region.

At this point, I’d like to turn the call over to Infomedia’s CFO, Richard Leon, to run through the financial results in more detail. I’ll be back on the call shortly to speak in more detail about next-gen platform and our outlook for the remainder of the year. Thanks. Richard?

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [2]

——————————————————————————–

Thank you, Jonathan. Good morning, everyone. Let’s begin on Slide 8, another strong result for Infomedia. We continued our growth momentum. And when compared to previous corresponding period, we delivered double-digit growth in all our key metrics: revenue, net profit after-tax and cash EBITDA. As a reminder, cash EBITDA is our key performance metric as we believe this offers a more transparent view of our underlying activity and acknowledges the impact of investing in product development and those costs that are capitalized. Backed by the strong revenue growth momentum, we are using this period to advance our investments in product development and sales ahead of near-term emerging opportunities, and Jonathan will elaborate on these emerging opportunities later.

Despite increasing the pace of our investments, the business continues to demonstrate its cash-generative nature, delivering strong operating cash flows. Cash balance is up $15.5 million in June ’19 to close at $17.2 million. The Board has declared an interim dividend of $0.0215 per share, representing an increase of 23% from the previous corresponding period.

Over to Slide 9. Parts and services each continued to deliver strong growth. Growth in our parts product largely came from a full period of revenue from the completed global Nissan EPC contract, and we continue to receive positive feedback from the many users around the world. Growth in services that includes an industry product suite continued to grow. Nidasu grew modestly during this half since the acquisition at the beginning of the 2019 calendar year as traction continues to build in Europe, Middle East and Africa, with several opportunities progressing well. All regions delivered growth in their respective local currency, Asia Pacific being the standout through several contract wins. As Jonathan mentioned, we have appointed a new Head of Americas, and we look forward to seeing the incremental contribution his region will add from the momentum he has generated in a very short period.

To Slide 10, this summarizes our revenue growth by half with the trend line well and truly moving in the right direction, and we expect this trend line to continue on its trajectory. For those that are new to Infomedia, our go-to-market is made up of what we call mandated and endorsed sales. Essentially, in a mandated sale, our customers take on the function of rolling out their solutions to their dealers. Endorsed sales, on the other hand, are where our solution, while preferred, are not exclusive, and this necessitates a door-to-door sales effort. These endorsed models may take longer to revenue and is more prevalent in the U.S. market.

With this backdrop, our revenue growth can be observed at 2 speeds. For example, a mandated win will often inject a growth spike and more pronounced if measured over a short period, such as 6 months. Regardless of the 2-speed tempo, we are confident to continue delivering along this revenue trend line and sustain an annual low double-digit revenue growth for the business.

To Slide 11, this is a reflection of our early years initially shared with the market at the June ’19 full year. The graph has been slightly updated to dissect each bar with their respective first and second half results. This graph recaps during the early years when we have determined our best option was to accelerate investment. The impact of this phase of accelerated investment is reflected by a period of declining cash EBITDA from FY ’16 to FY ’18.

Coming out from this into fiscal year ’19 was the year we realized the rewards from those investments and a lot of hard work building a solid platform for growth. Right now, at our next chapter of growth, we are excited to see further opportunities. Motivated by encouraging discussions with several prospects, we are leveraging off our strong revenue growth momentum to further invest in product development and sales. For this next phase of investment, we will continue to apply our proven, careful and measured approach to spend. Notably, unlike our first period of investment, we will not be compromising our bottom line annual growth.

To Slide 12, my summary. We flagged back at our June ’19 full year results that with a solid platform, we have the confidence to pursue new growth opportunities and inject further investment into the business. It is this solid platform that delivered growth for the first half of FY ’20 in all our key metrics: revenue, cash EBITDA and net profit after-tax. This positive momentum allows us to assertively invest to pursue our long-term growth ambitions. We will continue to apply our proven, deliberate and measured attitude to spend to capture these emerging opportunities and importantly, in a manner that does not compromise our near-term bottom line growth.

At this point, I’d like to return to Jonathan to share more details of these emerging opportunities. Jonathan?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [3]

——————————————————————————–

Thanks, Richard. Turning to Slide 14. And before I talk about the next-gen platform, I’d like to share with you how we think about the opportunity before us. So we have 180,000 global users. We are in 186 countries around the world. Our software supports the most profitable segment of our customer base, being the aftersales market. And in this period of geopolitical uncertainty and the slowing of the automotive new — a new sector, we’re seeing a clear shift of focus and real investment by our customers into aftersales. So we think about that and believe that we have a unique opportunity to capitalize on this position by investing in innovation and execution. We are one of the very few global players executing in this aftersales area, and we feel we have this opportunity before us.

Richard talked about the results of each of the regions, and I’ll go through those in a little bit more detail. APAC delivered strong growth on the back of a number of mandated rollouts, expansion in the regions and further growth with Nissan. There was good contribution from Nidasu as well as a number of emerging data opportunities. In EMEA, growth was solid in a period of — and on the back of a number of mandated wins, and we have a number of green shoot data and Nidasu opportunities. The Americas reported modest growth. I mentioned the appointment of new regional head, Brian Consaul. Brian’s background is forged in front-line sales, and we are very excited about the opportunities we see before us in the U.S., but do anticipate it will take 6 months to gain momentum.

So if you move to Slide 15, I’d like to talk a little bit about how we are capitalizing on emerging trends. Last year, we started talking about our investment to build the next-gen platform of an integrated parts and service platform. Next-gen EPC and menus will be rolled out over the next 12 months, and we feel this will place us ahead of our competition in terms of functionality and user interface. Added functionality on the platform presents revenue opportunities, though we are not anticipating any new revenue from EPC and menus next-gen in the financial year as rollout commence post 1 July. In a moment, I’ll cover next-gen in more detail.

We continue to drive global account planning across the business. This results in broader and deeper relationships with our key customers. In terms of partnerships, we are continuing to explore a leveraged sales model with a key focus in America. We have a few exciting partnerships in early stages, and we expect that the new leadership in the U.S. will continue to execute on these relationships.

We’ve previously spoken about acquiring assets that give access to new customers, new geographies and improve our technology offering. On this front, we have signed an agreement subject to conditions precedent to acquire a small Australian-based business that operates internationally. This acquisition will allow customers to optimize the use of our products within the dealership or national sales company, and we believe this will help us provide a more comprehensive offering to our customer base. We are seeing very strong opportunities to leverage our VIN-specific data assets across the globe. Having achieved a number of small wins over the last 6 months, we are looking to productize and drive bigger opportunities globally.

On Slide 16, next-gen, what’s it all about? Next-gen is taking our first steps in building out a moat. Next-gen EPC is a platform that provides us with an ability to move beyond siloed applications. It provides increasingly new functionality that will continue to allow us to integrate parts and service and our data of offerings. This is really executing our vision that we’ve been speaking about for the last 2 years.

I am truly excited about the launch of next-gen, and let me share with you why. It’s based on modern technology. We believe it surpasses the functionality of our competitors. It’s highly scalable. It’s much easier for us to deploy this solution globally, and it’s much more efficient for us to run internally. We believe it provides us with a great platform to build new functionality into our products. And very importantly, from a philosophical view, we’ve used what is described in the industry as CCD, a customer-centric design methodology to build an elegant, simple to use user interface that we believe our customers will love. And certainly, the feedback that we’ve got from customers using it is that they do love it.

So let’s have a look at some of the features that our existing customers get for free in the upgrade. And for the purposes of time, we will just be focusing on next-gen EPC. We have already released next-gen Triage and seeing some very good growth in that area, and we are and will be releasing next-gen Menus over the next 12 months.

Looking at Slide 17, and we’re just doing a bit of a deep dive into next-gen EPC just to give you a flavor for what makes us excited. Global search, we believe, is the fastest natural language EPC search engine in the industry, allowing users to search both vehicles and parts in one search to boost speed and accuracy. When you understand how a user uses EPC, a parts interpreter is searching up hundreds of parts, and speed and simplicity is critical.

Let’s talk about Active Jobs. This allows users to manage multiple customers, multiple jobs at the same time. Again, a unique feature in the industry, but when the user is managing multiple jobs and having to flip between applications, this is time-consuming. And again, we believe this, based on the CCD design process, optimizes their usage of our application.

Vehicle history is again an easy point-and-click lookup of previously searched vehicles backed by timestamped VINs, chronological display and vehicle imaging, really an elegant UI and a much liked feature in our process of designing this UI feature. And again, our mobile-friendly and intuitive user interface conveniently allows users to sell parts outside the dealership anywhere, any time, accessing catalog data on any mobile device, again, one of very few in the industry.

So if we move to Slide 18, we highlight 3 additional modules on next-gen EPC platform, which we again believe are market-leading, deliver tangible innovation and we believe are leading the industry around new functionality. These are modules that we will add to the EPC and typically charge for.

So the first one, service repair menu integration. Here, we have taken our service data, typically VIN precise menus for over 300 service, repair and accessory jobs that boost parts order size with a suggestion of additional related parts. This is unique because we have service data and many of the other players in the industry don’t. This allows us to give a unique value proposition adding to both parts and service, linking the value of these 2 pieces of data and providing our customers with the ability to upsell, cross-sell in their process of doing an EPC search.

EPC analytics. Again, this is a very exciting part of our business. We believe we’ve got the ability to link the demand for parts to the demand for sales. We think this gives a national sales company real insight around pricing, real insight around demand and real insight around different changes in their inventory, and we think that this is a game changer in the EPC space for the national sales company.

And then our EPC messaging platform. Again, purpose-built EPC messaging application, and this allows us to connect the parts counter with wholesale customers and the dealer workshop.

So in summary, next-gen, why am I, and why are we, so excited? It integrates parts and service. It offers modules with competitive difference. It contributes to our strong market position. It creates opportunities for new revenue and again, after the 12-month rollout, and we believe delivers BAU efficiency and scale.

So in summary, on Slide 19, we have delivered another period of accelerated performance with sustained revenue and earnings growth and cash generation. We continue to drive innovation and customer service. With our investment in next-gen platform and competitive market solutions, we believe this will allow us to capitalize on emerging trends and opportunities to disrupt across the automotive sector. We are navigating globally and steering locally by maintaining growth in the regions. We are confident in our global footprint and in our operating model. And just for those that don’t know, those are 3 core values that are key to our business. In terms of outlook, Infomedia will continue to invest and remains on track to deliver low double-digit growth in revenue and earnings in FY ’20.

That concludes Infomedia’s presentation of our results for the 6 months ending 31 December 2019. On behalf of Richard and myself, thank you for your time this morning. To our shareholders, I’d like to say thank you for your support. Richard and I are looking forward to catching up with many of you over the coming days. To those of you who are new to Infomedia, please get in touch, and we welcome the opportunity to meet.

At this point, I’d like to open up to any questions. (Operator Instructions) Thanks very much.

================================================================================

Questions and Answers

——————————————————————————–

Operator [1]

——————————————————————————–

(Operator Instructions) Our first question comes from the line of Garry Sherriff from Royal Bank of Canada.

——————————————————————————–

Garry Sherriff, RBC Capital Markets, Research Division – Executive Director of Equity Research & Head of Australian Technology and Small-Mid Caps [2]

——————————————————————————–

Yes. Jonathan, Richard, Garry here, RBC. Just a few questions. Firstly, the U.S. appears to have turned the corner in terms of sequential growth. Can you maybe just talk about some of that Americas execution? What have you done over the last 6 months? And maybe just give us a bit more background around that new U.S. head who started, I think, in late December, you mentioned.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [3]

——————————————————————————–

Sure. So look, the U.S., we are — we have actually been disappointed in terms of the top line growth in the U.S. We feel as a market opportunity, there’s much more that we can achieve. And in reality, from a top line perspective, we’ve been quite disappointed. Now Brian’s joined us. He’s got a very strong aftersales background in the industry and has both aftersales and data experience and background and again, pursuing strong opportunities around driving our mandated solutions, leveraging our partnership sales. And certainly, what we are seeing in terms of opportunities for us in the U.S., and these do take time to grow and build, but we are seeing absolutely more momentum. And certainly, we expect that leadership will drive more growth in next financial year, again, being conservative that it does take at least 6 to 9 months for a new leader to change the focus.

Look, again, the business we were — given that we didn’t have a leader for a while in the U.S., that just makes it more difficult to drive a real change, if you want.

——————————————————————————–

Garry Sherriff, RBC Capital Markets, Research Division – Executive Director of Equity Research & Head of Australian Technology and Small-Mid Caps [4]

——————————————————————————–

Just a quick question on auto sales generally. Again, everyone is talking about coronavirus. Obviously, you guys are directly leveraged, I’d say, to auto sales generally. I’m just trying to get a sense in terms of auto sales supply chains, can you give us some insights on your thinking here? I mean have you had any feedback, particularly over the last week or 2, from your big auto brands or dealerships as to what they are seeing on the ground and whether you think that could impact you into FY ’21?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [5]

——————————————————————————–

So Garry, at the moment, and what I don’t want to do is predict what happens in 12 months, but what we are seeing is new car sales drop, and the one lever that an auto manufacturer or national sales company can [sell] is to focus on aftersales. And we are seeing a clear shift, and this has been emerging over the last 12 months, but even more recently, we’re seeing — the absolute clarity is that the manufacturers are saying — and looking, saying, how do we protect our P&L? And in reality, aftersales is the key area, now more than 50% of profit, and it will increasingly become a higher percentage of their P&L.

So in terms of new car sales, it doesn’t — we’re seeing it possibly being a positive. It sounds — and certainly, even in the scenario that new car sales stop, and we can take an example where Holden pulls out of Australia as the one extreme example, the one thing they do have to do is maintain parts sales where they’ve got a long tail of 10 years, and they’ve got to maintain aftersales. So again, an investment in that area, would certainly — their intent would be, well, how do we maintain that?

In terms of coronavirus, we don’t see any impact in terms of our business, in terms of supply chain. But in terms of the global conditions, I can’t comment what could happen in the next 12 or 24 months. I think it would be — I’m not a magician. But what I do think is that our business seems to be very nicely insulated. In fact, in some respects, almost countercyclical to the new car sales drop.

——————————————————————————–

Garry Sherriff, RBC Capital Markets, Research Division – Executive Director of Equity Research & Head of Australian Technology and Small-Mid Caps [6]

——————————————————————————–

Okay. Two more questions, and then I’ll jump off the queue. But firstly, EBITDA margin, really pushing north again, which is great. I’m just trying to get a sense, should we expect that to taper off a little in the second half as investment continues? And what do you think is realistically sustainable for the group over the medium term?

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [7]

——————————————————————————–

So Garry, Richard here. Thanks for the question. The EBITDA has been a line item that’s been probably difficult to articulate until at this time where we’ve demonstrated our first phase of investment, drove revenue and built a very strong platform, and we’re now entering into our second phase of investment. And this is primarily why we’ve introduced the concept of cash EBITDA to go through it. Yes, you’re right. The first half of ’20 EBITDA is strong. We are going to continue to invest, and a lot of that investment is to the emerging opportunities. So equally, there will be a decent chunk of capitalization of that investment. So the outlook for EBITDA in the second half will be more or less the same.

——————————————————————————–

Garry Sherriff, RBC Capital Markets, Research Division – Executive Director of Equity Research & Head of Australian Technology and Small-Mid Caps [8]

——————————————————————————–

Okay, that’s clear. And the final one, just on data insights. You stated on the call that it grew modestly. Can you maybe give us just a sense of roughly — I know it must be immaterial, but what the revenue generated was this half and how we should think about FY ’21? I mean I’d love to get some thoughts on when you think it might contribute meaningfully to group revenue.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [9]

——————————————————————————–

So at the moment, we’re not splitting it out. We are very excited about the opportunities in the data area, in particular, and in the Nidasu area, by the way. When it does become a material number, we will explore how we report that separately. But certainly, what we have seen is there is a longer gestation period on the sales side to sell and there are a bunch of things that we’ve got to get aligned from a sales perspective, getting the manufacturers to allow us to use certain data. Once we’ve got that, it becomes a much easier sell. And certainly, we think that we’ve kind of passed phase 1 and done the initial sales, productizing those and leveraging those globally, we think, is where the real upside and where it becomes material. At the moment, we’re not separating those numbers out. I would like to be able to do that in the future.

——————————————————————————–

Operator [10]

——————————————————————————–

We will take the next questions from the line of Quinn Pierson from Crédit Suisse.

——————————————————————————–

Quinn McComas Pierson, Cr̩dit Suisse AG, Research Division РCo-head of the Small Cap Research [11]

——————————————————————————–

I guess, just firstly, on the next-gen products. It was a helpful background. It sounds like the bulk of these will be kicking in kind of after the 1 July period, so very much an FY ’21 story. Could you maybe just help us understand how to think about the revenue uplift or the revenue opportunity from these? Is it more a stronger product to access new customers? Is it more increasing your revenue from your existing customers? And to the extent it’s the latter, maybe just help us understand what kind of deltas we could think about in terms of being able to step up and further monetize that — your existing customer base.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [12]

——————————————————————————–

So I think those are great questions. I’ll start off with, to me, as a business, we’re going to invest in the long term. We believe that we want the best product in the market, and that allows us to capitalize off an opportunity that we see before us. We do see 3 specific areas of opportunity by building next-gen. Number one, we do believe that we can take our existing installed base customers and upsell new modules. And we think that, that is important for us, and we’ll maintain a growth tangent. If you remember, if you look at our parts business previously, 3 or 4 years ago, we were really getting close to 0 growth in the parts business. And our view is we would like to do and we were mentioning a higher growth than 0, because that’s not a great position to be in. So our view is we can achieve a good organic growth in our parts business in the modules, adding those existing customers.

The second thing is if you have the best product in the industry, if people are looking to build a new EPC, that makes us the strongest competitor. So we think that positions us as the contender of choice in that selection set to win new EPCs and extend out our EPCs to existing customers. So then to quantify that at the moment, we are not — internally, we are looking, and we don’t want to set any market expectation. However, when we have more data points around what the upsell and cross-sell will be, I think we will provide that to the market. But at the moment, we are feeling confident that it does maintain a degree of organic growth that we weren’t getting in the parts business. And again, until we get real data points, which is in the next, really, 6 to 12 months, we think we’ll share that with the market.

——————————————————————————–

Quinn McComas Pierson, Cr̩dit Suisse AG, Research Division РCo-head of the Small Cap Research [13]

——————————————————————————–

That’s helpful. And just a second on the reinvestment. I kind of want to circle back to the expected kind of investment and expenses. I mean should we be thinking about another step-up in terms of spend, both either through the P&L or through CapEx on the — of the first half, kind of a step-up kind of half-on-half? And I guess, what I’m trying to marry up is your guidance for low double-digit top and bottom line growth, it just looks very meaningfully conservative, particularly in light of the first half. So I’m just trying to understand if there’s any kind of meaningful step-up or meaningful timing to occur in the second half to marry that up with your full year guidance.

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [14]

——————————————————————————–

Quinn, Richard here. So when you reference to our statement of low double digits, let me talk to that first. The low double digits was to clarify and was purposeful. It was purposeful, because we knew our first half results when compared to the previous corresponding period is going to look very, very good, and it is very, very good. We are very proud of it. What we’re trying to be consistent with is we’ve communicated to the market that we believe we’ve built a solid platform that can maintain this level of growth on an annual basis. Yes. We also see new opportunity that we feel that now is the period to further our competitive differentiation, and we want to invest in it. We’ve also proven in the past that we can manage our spend in such a way that we build a framework that we’re confident we can deliver both short-term profit and also pursue our long-term growth ambitions.

To answer your specific question, Quinn, yes, we do expect an uplift, and that will have some impact to cash EBITDA. But again, hopefully, what you’re hearing is that we believe we can maintain the same level of growth in low double digits to our earnings, our NPAT.

——————————————————————————–

Quinn McComas Pierson, Cr̩dit Suisse AG, Research Division РCo-head of the Small Cap Research [15]

——————————————————————————–

Helpful. And then just lastly, if you could talk us through how you’re thinking about acquisitions, on the M&A front. With Nidasu, we saw that as an Aussie business, there’s some opportunity to kind of grow that and take it offshore. Are there kind of further opportunities in the pipeline, if you’ve hopefully a line of sight on any potential targets? Or is that too soon? Any thoughts would be appreciated.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [16]

——————————————————————————–

Look, we think that there are specific opportunities, both in the parts, service and data areas. We are looking at them. It’s not a key driver for growth, but we think that certainly in some fragmented markets, our ability to achieve either customer growth, technology growth or extend our service offering is key. And certainly, it is an area that we’re looking at. But we want to be — it’s a very — we have a specific and formal approach to looking at how we explore M&A, how it is relevant to our strategy. We do have a bunch of targets that we look at. And I think we have a very good and mature process to manage that, and we do expect the market on the whole — specifically in the services and data area, it’s fragmented globally, and there is an opportunity globally for us to take a leading position.

Certainly, M&A could help, but we have to find the right organizations with the right cultural fit and with the right dynamics to fit into what we are trying to do. There is a lot of stuff available and a lot of opportunities. I think we’re just being very careful and deliberate around making sure it fits specifically with our strategy but even as importantly as a smaller business with our culture and with our specific objectives.

——————————————————————————–

Operator [17]

——————————————————————————–

Our next question comes from the line of Tim Plumbe from UBS.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [18]

——————————————————————————–

Good result. Just a couple of questions from me. Wondering if you can talk about the rollout of Superservice specifically in Australia. APAC was really strong, kind of up 10% half-on-half. How did the integration into Pentana play into that? Was that kind of working through a backlog of pent-up demand? And how are you seeing the pipeline in Australia?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [19]

——————————————————————————–

Cool. So we have a very strong pipeline in Australia for Superservice. The integration, I think, did pay in. It still is slow working with DMS providers globally. They are not necessarily the most agile players globally. However, we think we have the best product in Asia Pacific from a Superservice perspective. And I think the market is validating that, and we are seeing significant opportunities, and we are winning significant opportunities in our APAC region, plus elsewhere. But we are seeing that growth and that pipe absolutely playing out, and I think we see that continuing for 3 or 4 years.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [20]

——————————————————————————–

Great. And just to clarify, is it right that Pentana is changing their platform again? They’re bringing out a new platform that you’ll need to reintegrate back into. Or is that right?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [21]

——————————————————————————–

We are, I believe, integrated into the new platform. It seems to be a re-skinning of the old platform, so it’s not dramatically different. But yes, there is ERAnet and eraPower, and I believe we are the only players in the electronic vehicle health check world that are integrated in Australia to Pentana. More, or as importantly, is we also think that in ASEAN region and a whole lot of other regions, there are opportunities that are emerging with Asian rollout and European rollout and U.S. rollouts that we’re getting some good traction on also.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [22]

——————————————————————————–

Great. And sorry to harp on about it, and apologies if you’ve already answered it. I’ve just been jumping between calls. But in terms of that low double-digit guidance, how should we think about the parameters of low double-digit growth?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [23]

——————————————————————————–

Well, it’s probably between — it’s not 99% and that probably is above 10%. Sorry, I’m being facetious there. Richard, why don’t you answer that one?

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [24]

——————————————————————————–

So Tim, you probably missed the previous discussion that the way — the reason why we came out with low was to be deliberate in coming out with low. And the low is similar to the — what we have achieved in the past, what the market is expecting. I think the takeaway here is that we didn’t really want to get too much of a run-up based on the first half results when compared to the previous corresponding period. Having said that, whilst we’re still investing for these emerging opportunities that Jonathan talked about, we’re still very confident that we’ll deliver the low double digits, both top line and bottom line profits.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [25]

——————————————————————————–

Okay. I mean like would 19%, 20%, is that considered within the parameters of low? Or is that considered above low?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [26]

——————————————————————————–

I mean I think from our perspective, again, we think that the market expectation, roughly year-on-year, is consistent with our expectation. And there are a bunch of moving targets, as we mentioned, specifically data and the U.S. opportunities that are difficult to call, but they are looking positive. But again, we are sticking to what we think is the market expectation, which is consistent with. And by the way, you make up part of the market expectation, Tim. So I think — but our view is, again, we don’t want to be too — as an organization, we’ve been quite conservative, making sure we don’t oversell the opportunity. We think that is the right way to run our business and cautiously optimistic, but I think that the current market expectation we would support around the growth, both top line and bottom line.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [27]

——————————————————————————–

Totally agree with that. And just very last question for me. You guys have spoken in the past about opportunities to go into new segments, helping out in the insurance space, helping out in panel repairs or the smash repairs space, et cetera. How are you guys thinking — I think you had a whole bunch that were in kind of the incubated you’re working on, how are you thinking about those opportunities? Are there any that are kind of more at the forefront than others?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [28]

——————————————————————————–

Yes. So actually, those have progressed, and we’ve got — we’ve actually — again, they haven’t been — and again, we are being more conservative around what we disclose and how we disclose it. But those have progressed. We’ve got some partnerships that we’re trialing some of these out in the U.S. as an example. We recently signed a partnership where we’re trialing some of that. We’ve got a bunch of quite exciting opportunities, which are in proposal. And hopefully, we can announce maybe 1 or 2 of those if and when they close. And certainly, those, again, were consistent with what we presented previously, which is how do we take our data assets, whether those be EPC and Menus data, and promote those through data APIs or through embedding those into different applications. We’re seeing real opportunities in those spaces.

And again, I’ve closed a few quite small ones which allow us now to productize those, and those are looking very promising. Again, as soon as we’ve got something that is more material, and really, we do have a bunch of opportunities and proposals out there, as soon as we close those, we will possibly disclose those maybe as a bundle. And again, it’s probably too early to disclose now. There are enough, certainly, to — you can gauge our excitement in that area, Tim.

——————————————————————————–

Operator [29]

——————————————————————————–

We have another question from the line of Nick Burgess from Baillieu.

——————————————————————————–

Nicolas Burgess, E.L. & C. Baillieu Limited, Research Division – Equity Research Analyst [30]

——————————————————————————–

Just a couple of questions. Richard, just firstly on the result. Obviously, Nidasu was included in this period but not really in the prior period. My math suggests that there’s about 14% organic growth out of your 19% total growth. Is that fair or in line with what happened in terms of organic perspective?

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [31]

——————————————————————————–

Probably slightly higher, but you’re pretty much around the ballpark there, Nick.

——————————————————————————–

Nicolas Burgess, E.L. & C. Baillieu Limited, Research Division – Equity Research Analyst [32]

——————————————————————————–

Yes. Okay. Just in terms of the investment that you’ve been talking about. Just a point of clarification, roughly about $10 million per half is what you’ve capitalized over the last few years. I think previously, you’ve said that, that might sort of start to trend down. Are you saying now that’s going to be sustained at that level, say, for a couple more years broadly or that it’s actually going to step up?

——————————————————————————–

Richard Leon, Infomedia Ltd – CFO [33]

——————————————————————————–

So what we’re saying is it will step up, but it will step up because we see these emerging opportunities, and they are looking positive with the discussions that we have. So the way we see this is rather than trying to manage a business on a status quo basis, we look for new opportunities. We want to leverage those, and we do expect a step-up for the second half. Would it come down? I think that is going to be more a question of how those opportunities play out.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [34]

——————————————————————————–

And to almost link that to the previous question really, which is, if you think about some of the data opportunities, some of the Nidasu opportunities as we win some of those and next-gen, we need to build out some of those. And again, that is an investment. Is that a good thing? We hope so because that is revenue generative and is clearly an investment in building out some of that infrastructure. But again, there is a fairly significant set of opportunities that we will be building out over the next 6 to 9 months, we think, which is specifically around things that we can see in front of us.

——————————————————————————–

Nicolas Burgess, E.L. & C. Baillieu Limited, Research Division – Equity Research Analyst [35]

——————————————————————————–

Okay. And just further to that point, Jonathan. I noticed just in your discussion on the next-gen for EPC, you talked about an analytics module. Is Nidasu part of that as a specific question? And I guess the second question is how much sort of integration of some of these things you’ve been working on is now sort of going into the one piece of the next-gen platform as you describe it.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [36]

——————————————————————————–

So it’s a good question. Nidasu specifically is not part of that analytics module, but it might be part of the platform, which is how we disseminate some of that data, but it does depend. Specifically, on the EPC, that is actually — it’s actually data that we’re getting and insights that we’re getting out of the metadata that we get from EPC usage. However, what you’ve picked up is exactly part of our strategy, which is how do we take different data sources or disparate insights and feed them across a platform. And certainly, at the moment, we’ve got programs and projects happening where we’re linking Nidasu and our CRM product. We’ve got integrations around Nidasu and our Triage product around some of the insights that we’ve got. And then we’re looking at, again, BI analytics around Nidasu and some of our other products.

So this is the whole intent of having this platform where next-gen can surface data and insights around different — which were siloed applications, and we’re seeing lots of those opportunities, and this is really why we’re excited about that from a platform perspective.

——————————————————————————–

Operator [37]

——————————————————————————–

We have another question from the line of Chris Savage from Bell Potter.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [38]

——————————————————————————–

I think these will be pretty quick. Just back on Nidasu, you mentioned some growth in the half and green shoots, particularly in EMEA. Has Nidasu actually won a contract yet overseas? Or has the growth still been predominantly in Australia?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [39]

——————————————————————————–

So we have won a couple of small contracts in Europe. We were — actually, in Europe, we’ve got a bunch of big opportunities and exciting opportunities. The reality is these enterprise sales take a long time. They are global, and they are sticky when you win them, but they take long to win. And once you’ve won them, they are exciting to roll out. So we won a couple of small ones in — and again, we’ve got a very good pipe in that area.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [40]

——————————————————————————–

And picking up on your earlier comments about mandated, I’m guessing that because these are with — directly with the OEM, they would be mandated-type contracts.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [41]

——————————————————————————–

That’s correct.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [42]

——————————————————————————–

And just on the acquisition, Jonathan, you mentioned that you still [at least] signed heads of agreement on. Can you give us an idea about the consideration and whether there’ll be any earnings contribution in the second half?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [43]

——————————————————————————–

Again, fairly small, minor earnings contribution but more strategic around leveraging our ability to, a, provide a broader offering to our customers and also allow us to implement our solutions and get kind of broader opportunities within — post implementation.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [44]

——————————————————————————–

And does it fit in a specific area, parts, services or data analytics? Or is it across all 3?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [45]

——————————————————————————–

It’s primarily in the service space around helping us execute in the service rollout, yes.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [46]

——————————————————————————–

Okay. And just last question. The Nissan EPC rollout you mentioned is now done. Was there any upside to the original contract? I just remembered Japan looking at some extra bells and whistles that might have been rolled out globally?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [47]

——————————————————————————–

So yes, Nissan EPC is done. What we’re now doing, again, is they form part of our global account planning process. And certainly, as we look at all our big customers, we’re looking at how we can offer a broader, deeper solution. And so then it’s not part of the EPC role. It’s a much broader how do we offer our global customers global solution. And certainly, we’re seeing good growth in that — in a bunch of our global customers, not only Nissan. And yes, we’ve got a bunch of opportunities with Nissan that are in play and are quite exciting also.

——————————————————————————–

Chris Savage, Bell Potter Securities Limited, Research Division – Senior Industries Analyst [48]

——————————————————————————–

So did the Nissan EPC contract increase or it’s just basically as you expected?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [49]

——————————————————————————–

No. So just to be specific, the Nissan EPC contract itself doesn’t increase, but we win more other contracts outside of that contract, which allows us. But the contract itself is roughly — it might have increased a little bit, but not very much.

——————————————————————————–

Operator [50]

——————————————————————————–

We have a follow-up question from Tim from UBS.

——————————————————————————–

Tim Plumbe, UBS Investment Bank, Research Division – Research Analyst [51]

——————————————————————————–

Sorry, one last one from me. Just in terms of the next-gen on the EPC side of things, you guys haven’t really been able to put through any price increases on the EPC side for a while. Does this new product range give you capability to do that? Or is it more just about generating a stickier customer and hopefully getting some of those add-on modules?

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [52]

——————————————————————————–

So I think in terms of the core business, we don’t expect significant price increases besides CPI-type level on renewals. However, the new modules allow us to offer and drive extra revenue outside of the EPC growth. But yes, I don’t think next-gen itself drives specific price increases of our existing customers. But we — again, we do think the ability to sell modules increases revenue in those customers, but we’re specifically extracting those outside of our EPC role.

——————————————————————————–

Operator [53]

——————————————————————————–

(Operator Instructions) At this time, we have no more questions from the line. I’d like to hand the call back to the management for closing.

——————————————————————————–

Jonathan Rubinsztein, Infomedia Ltd – MD, CEO & Executive Director [54]

——————————————————————————–

So look, I do want to thank everyone for your time. I know it’s a busy time of the year. Look forward to catching up with everyone. Richard and I and Tanya look forward to seeing you, and I’m sure we will have further conversations. Have a great day. Thank you very much.

Source Article