Q4 2019 Earnings Call
Greetings and welcome to <unk> Inc. fourth quarter 2019 earnings call.
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I'd now like to turn the conference over to your host Ryan Schram, Chief operating officer. Thank you. Please begin.
Good afternoon, and walk into ideas Q4, 2019 earnings call I'm, Ryan Schram, Chief operating officer is the up a joining me today is idea interim Chief Financial Officer, Leann, Hitchcock and idea Chairman and Chief Executive Officer, Ted Murphy.
Thanks for being with US this afternoon.
Earlier today, the company issued a press release with details pertaining to our fiscal year performance for 2019.
To review those details all by the as Investor information can be found on our Investor Relations website at <unk> Dot com forward slash investors.
Before we would get please take note of the Safe Harbor paragraph that appears at the end of the press release copper in the Companys financial results and be advised during the course of todays earnings call. Our management team will discuss ideas business outlook and make forward looking statements.
These statements are predictions based our teams expectations as of today that are subject to inherent risks and uncertainties and should not be unduly relied upon.
Actual events or results for trends could differ materially to our forecast due to a number of factors, including those mentioned are most recently filed periodic reports with the FCC.
The company and our management team assumes no obligations to update any forward looking statements made in today's call.
In addition, our updates there will also refer to certain non-GAAP financial measures.
Separately growth believes that adjusted EBITDA.
Right and so each of these measures the most directly comparable GAAP measure is presented our earnings release with additional discussion of both of these measures available at our most recent form 10-K.
And 10-Q available under I see see filings in the Investor section of <unk> Dot com.
With the appropriate disclosure is out of the way I'm pleased to introduce my colleague and ideas interim Chief Financial Officer.
Hitchcock Leann.
Thank you Ryan good afternoon, everyone.
As we continue to transition towards a more balanced business with fast related services. It is important to note that ideas individual revenue streams have different accounting treatments for revenue recognition.
Managed services South licensing fees are accounted for as gross revenue well marketplace spend and legacy workflow fees result in revenue being recorded net of the amounts paid to the creators providing the services.
Overtime.
This difference in gross and net revenue recognition may widen the gap between what we report as gross billings in bookings.
Ultimately gets reported as revenue in ideas financial statements.
Additionally, the mix between revenue from our managed services and self services will close swings in our reported cost of revenues as a percentage of revenue. That's the reported cost of revenue line item primarily relates to managed services.
I would like to begin with a summary of the fourth quarter 2019 before moving onto the results for the full year.
For the fourth quarter 2019, I see it reported total revenues of 5.8 billion with 5 million coming from our managed service business and 800000 coming from our SaaS offerings.
We saw an 83000 or 2% increase in our Q4 2019 managed service revenue, but this was offset by a 600000 dollar decline in our self service revenue in Q4 2019 as compared to Q4 2018.
For Q4 2019, our gross billings on these revenues decreased to 7.8 million compared to 11.1 billion in Q4 2018.
This 30% declining gross billings was primarily due to lower marketplace spent in the top influence platform customers and churn in the renewal of some of those customers, resulting in a 600000 dollar decrease in south services revenue.
Our cost of revenue exclusive of the amortization was 2.7 billion in Q4 2019.
Compared to 2.6 million in Q4 2018.
As a percentage of revenue our cost of revenues exclusive of amortization has increased from 40% in Q4, 2018% to 46% in Q4 2019.
This increase is consistent with what we would expect to see as our balance of revenue derived from ourselves offerings declined in this quarter.
Our total cost and expenses for 8.1 billion in Q4, 2019, compared with 6.8 million for Q4, 2018, driven largely by increases in our general and administrative expense attributable to a 418000 dollar impairment charge on or intangible assets for software technology.
And our investment of over $536000 in sales personnel and marketing spend to generate future revenue.
Doing the math on the revenue and cost amount.
Adding a decrease in our interest expense, resulting from lower average balances outstanding on our line of credit.
Our net loss for Q4, 2019 was 2.3 million or seven cents per share compared to our net loss of 693000 or six cents per share for Q4 2018.
When looking at the full year 2019, the same themes I iterative for Q4 are impacting before your amounts as well.
Full year 2019 revenues were 18.9 million down 6% from 20.1 billion for 2018.
Billings for 2019 were 29 million down 3% from 30 million for 2018, the amount of South gross billings increased by 1.1 million accounting for 47% apart billings in 2019.
Fair to 41% of our billings in 2018.
Managed services decreased 12% in the same period in 2018 due to a 30% decrease in our frontline sales personnel, which resulted in lower bookings and revenue and the first three quarters of 2019.
License fee revenue increased 73% to 2 million compared to 1.2 million in the prior year through a combination of strong organic growth of idea ex offset by the declining customer base from cap influence.
Our cost of revenue exclusive of amortization was approximately 8.5 million or about 45% of revenues for 2019, consistent with the prior year levels at 45% representing total cost of revenue of approximately 9 million.
Our total costs and expenses were 26.1 billion for 2019 compared to 25.5 million for 2018.
The increase was primarily attributable to the $418000 impairment charge on or intangible assets for software technology and increases in consulting costs and marketing spend.
Our net loss for 2019 was 7.3 million or 29 cents per share compared with a net loss of 5.7 million or 67 cents per share for 2018.
Switching the discussion to our liquidity briefly before turning the call back over to Ted.
As of December 31st 2019, we had cash on hand of nearly 5.9 million with no mounts used on our line of credit.
Our available line of credit remains at 5 million with accounts receivable on our books at December 31st to support a full draw on that line had been desired.
As we disclosed in our annual report filed earlier today.
Based on what we know today and our current plans, we expect that our cash on hand in line of credit available to us will be sufficient to cover operating needs for the next 12 months with that I'll turn the call back over to Ted.
Thank you ran before I get started I would like today my fellow ideas as well as the teams at Keno gates and BT.
Either simply extraordinary times.
People are working diligently and very difficult and on certain situations.
I appreciate the effort and commitment to get US filed on time, despite the challenges we all face.
Todays update will be briefer than usual as our entire team is focusing their time and effort on the core business.
2019 was a transitional year for our company as we integrated tap influence and shuttered the byline platform.
Following our capital raising Q2, 2018, we began making investments in sales marketing and engineering to support for growth initiatives.
It was investments translated to the start of the topline rebound in Q4 last year.
With managed services bookings up 22% year over year.
And revenue up 17% and the second half of 2018 as compared to the first half of 29.
In addition to the strong Q4 managed services bookings growth.
We also saw meaningful increases in efficiency.
Our revenue per managed services salesperson increased approximately 25% for fiscal 2019 compared to 2080.
Well churn of certain tab influenced customers.
And with our SAS pricing model revisions well continue to impact year over year comparisons precise licensing in marketplace revenue.
The total number of SAP customers licensing Rdx technology hit another high in December.
We tapped influence completely integrated into IC attacks and shattered in Q1 of 2020.
And all of our customer transition is complete.
We can focus our efforts and I see it acts and brand graph, we are cautiously bullish ideas X licensee in 2020.
Despite the current challenges surrounding coated 90.
Total fees under contract my licensees that idea in 2020.
Already 40% greater than all I see it acts license fees collected in 2019.
Partially due to the transition of tap influenced customers into idea.
Their contracts renewed.
Our software customer foundation built upon idea.
Appears to be strong and we believe that increased usage and licenses of the software by additional customers will help to offset the lower fees charged for our services.
Customers have been renewing their licenses the past two weeks.
Even after the Corona virus outbreak started to more broadly impact the world.
Monthly recurring revenue or more or price yet.
Hit an all time high in March or 2020.
We view these renewals as the strongest possible evidence of the underlying value of IC attacks.
In a time of global panic skewed toward time, when spending is greatly reduced and marketing budgets RBC.
A number of our customers are renewing 12 month commit for our software.
The count of new ideas accidentally customers added in Q1 2020 are up 85% from Q4 between 19.
Each idea ex renewal is a testament to what our team has created.
And we want to say, thank you to our customers.
We appreciate your business and we'll continue to work tirelessly on your behalf.
But idea X is just part of the equation.
Last year, we announced brain graph.
Brand graph is designed to provide brands with Indepth analysis and performance benchmarking of social media content.
It allows marketers to understand who is talking about their brand.
But they are saying and how brands measure up against their competitive set through a myriad of unique performance standards.
After a successful beta period idea began offering he bring raft licenses to large brands and agencies in mid February.
If you short weeks, we signed a brand new Fortune 500 customer who is net new to idea.
And another multibillion dollar enterprise that was also not needed to idea.
Early indicators for that the product is of high value to brands and the sales cycle could be the fastest but all of our offerings.
Since coded 19, we've seen a slowdown in new brain graph commitments.
But not in interest in customer Oh, when we do product demos.
I'm confident that as the world begins to normalize we will see an uptick in new licenses.
I would now like to speak briefly about the impact of coded 19.
I see his leadership is currently assessing the landscape for our company following the global Corona virus pandemic.
If he wants to stay at home orders by state and local governments.
The health and safety of our employees is our number one concern.
On March 13th we took proactive measures to protect our workforce by instituting an immediate work from home policy for all employees in advance of government directives.
He might idea was already geographically dispersed and accustomed to virtual interaction with customers in coworkers.
Our infrastructure has been designed to allies used to work from anywhere with Internet connection.
And our business continuity plan has been tested through multiple natural disasters over the past few years.
Ideas overall internal business operations continue today with minimal impact.
However that is not to say that this is business as usual.
It is far from it.
If you have not yet had a chance to view my March 18th 2020 briefing on the impact of Corona virus.
I invite you to visit idea dotcom slash coated 19.
On that page you will find new video and downloadable presentation.
Outlined the impacts we predict on consumer habits, as they relate to influencer and content marketing.
Management believes there will be near term implications surprises topline sales and revenue.
Good worsen if the macro economic climate worsens overtime.
Idea is fortunate in that the company serves a very diverse customer base.
While many of our customers are currently experiencing massive decreases in consumer demand and pulling back on spend.
We have others, who are seeing material increases in consumer demand, particularly those in high frequency CPG grocery and finance.
However, we are seeing the ways across most industries in new contractual commitments as legal finance and marketing teams at large organizations scramble to regain their footing and developed plans for the road ahead.
Must assume a slowdown in both bookings and revenue recognition for the foreseeable future.
We are taking measures to lessen the impact on idea.
Idea was already in an ongoing process of optimizing our operating expenses prior to the co that 19 outbreak.
We had consolidated some departments and managerial positions to streamline operations.
And some material decrease in hosting costs through idea ex platform are factoring in the shutdown of the tap influence platform.
However, the current pandemic will necessitate accelerating more rigid cost control initiatives.
Some of the immediate measures we have already taken include hiring freeze and employee reductions the reduction or elimination of contractors and vendors.
He free internal travel and entertainment expenses.
In a reduction in shift and marketing spend.
Given the uncertainty related to stayed home orders in our ability to work and collaborate remotely.
We're looking at multiple options, we have available to us when the lease for our headquarters in Orlando expires at the end of April 2020.
Including extended work from home initiatives and short term flexible office space.
We've also made the decision to vacate and canceled the various co working facilities. Our team members use around the country as our short term leases for these facilities expire in the next one to six months.
We believe the timing of our lease expirations is actually fortuitous for idea.
We will use this opportunity to reevaluate our structure and negotiate lower cost contractual commitments for our locations as needed moving forward.
We're not yet done with cost saving measures I.
I'm working with the leadership team and the board of directors to identify additional areas of savings and optimization.
Nobody can predict the ultimate lake or magnitude of impact that coded 19 will have.
We are weighing those past begets, both short and long term risks and operational implications.
In addition, and cost control measures, we have proactively bolstered our available cash by tapping a portion of our credit line.
We will likely take advantage of additional draws from the line in the future to maintain strong cash position.
As he will also be exploring eligibility for government provided small business disruption loans under the cares Act and we intend to take advantage of these programs if approved strengthen our cash position to be able to retain employees needed to sustain our business operations and provide quality service.
Our customers.
Now that we've addressed cobot 19.
Do you want to share a bit of hope and optimism.
Coming into this pandemic.
Yes, it really hit its stride on both sides of the business.
My disposition in as little as three weeks ago was incredibly bullish.
Managed services and SAS licensing sales were on plan for material increases in bookings in Q1.
We had made a significant reduction in costs.
We were well ahead of our internal plan for both revenue and EBITDA loss.
Cobot 19 will be a setback.
There's no way around that.
Idea like almost every business on the planet will have to adjust its plans and expectations.
We must navigate this point in time.
But does not change my long term optimism for our business where industry.
We believe idea will be an even more efficient and competitive business on the other side.
I founded idea one your prior to the financial crisis that began in December 2007.
We weathered that economic storm with perseverance grades and creativity.
There were some painful decisions we had to make.
But we made it through.
On the other side of the recession, we saw explosive growth.
And 14 years waiter, we're still a leader in this space we created.
With a large roster of fortune 500 brands in a world leading agencies counted among our clients.
I have never been prouder of the idea team.
This event has brought us closer.
We are physically further apart.
He might be a has been stepping up every capacity to help in any way they can.
We had been moving with speed and conviction.
It has been remarkable to see this team deliver under extreme pressure.
Thank you team.
You are all incredible.
So all of our investors and partners I wish you safety and health.
We will get through this.
Together.
I would now like to open the call procurement.
Thank you at this time, we will be conducting a question and answer session. If he would like to ask a question. Please press star one on your telephone keypad.
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One moment, please why we called for your questions.
Our first question has come from the line of Mike Malouf with Craig Hallum. Please proceed with your question.
Great and thanks for taking my questions.
And Mike.
Hi, a wonderful <unk> first off on the an idea acts and I'm wondering if you couldn't at this point now that you've gotten everything's switched over time as he acts give us a little bit of a color on how many customers you have now maybe excited the range of.
Per month or per year that the these contracts are in size and maybe an average to give a sense of what's going on there.
Yeah, well, we're not going to disclose that.
Exact customer accounts or or price ranges really for competitive reasons.
You know what we what I can tell you is.
The overall customer count it.
And all time record at the ended the quarter.
That is partially from IDXX discovery customers and partially from.
Hi.
Unity suite customers.
What we have also seen is here in Q1 of the account of new IDXX Unity suite customers is up.
About 85% from.
From Q4.
So now we believe that we are.
We're starting to get some material traction there.
Yes, we are continuing to see those customers renew.
But on the platform.
Even even now through through Cobot 19.
But you know given to.
Given the amount of competition that there isn't in this space currently.
We're not going to put out information that.
Yes.
Provide too much detail on pricing got it and then.
With regard to marketplace spend that's there been any change with regards to marketplace spend and their willingness to to make that part of the of the package.
No. We have we have definitely seen more customers that are doing product only activations. You know that that has had an impact on army overall marketplace spend and the revenue that we get to recognize from.
Okay great.
Okay, Great and then just a clarification on the I'm on the spend in DNA.
There was a 418000 in the gionee of the impairment charge.
Yes, I'll, what we can speak to that.
Yes, that's correct there was a 418000 dollar impairment charge.
And that was as a result.
The transfer of the top platform to the idea act and all those customers. It really was the kind of unusable portion of the software or that was remaining.
Okay, Great. So then going forward.
We should be back down to sort of that 1.6 million level going forward.
For GE, an expense or I'm, sorry, I'm, sorry to push me sorry, 2.6, my going forward.
Virginia.
We with the coal bed, we are not really putting complete estimates out at this point just.
Because of the unknown.
But they should should definitely start returning back to normal as we are optimizing our cost.
And then with regards to the sales personnel is that in the that that's in the sales and marketing pop that we saw.
Right right around 1.4 than last quarter was 1.5, and then it jumped up to two 2.0. That's the 536000 is in the isn't the sales and marketing side is that correct.
Yes, it was pretty much <unk> half half of personnel and the other half was related to the additional marketing spend that we weren't best again.
Got it okay, great all right, that's what I need a sexual appreciate it.
Sure.
Our next question, it's come from the line of Jon Hickman of Ladenburg. Please proceed with your question.
Hi.
Kevin I was wondering could you.
Comment on you mentioned two customers for brand graph.
Are there more than that.
You mentioned to really large ones.
Could you give a little bit more.
Yep those those are our initial customers for that.
Platform, we really started to sell that right.
Oh good.
Began to explode.
So we do have a lot of Oh.
Opportunities in the pipeline right now, but those are are the two core customers I will say that the sales process for those customers was.
Incredibly fast faster than Izeax annuity suite certain way and.
Significantly faster than any managed services that sell.
Both of those customers are also.
Where net new to idea.
One actually.
Licensing brand graphs, and then shortly thereafter turned into an idea ex customer on the other side.
So were helpful hardware, we're hopeful that we'll see more of that type of activity.
Once once the dust settles, a little bit and people get back to.
More normal activities.
So let's talk about that for a minute so.
To me that you're an advertiser count reach me well I'm out in about.
They can reach me well I'm.
Well, you know streaming netflix or whatever but it seems like social media is like.
The everybody's on your phone that seems like a perfect opportunity to increase my social media advertising.
Effort.
Are you Yemenia wheat.
We definitely we agree with you that that's what our resorts. Our research also points to I think that what we're seeing now is is really <unk>.
You know people are just a bit gun shy right and and.
They're working from home [laughter], there's just a lot of disorganization right now.
But I do think that that from a.
Product perspective, Influencer marketing is a great fit for advertisers its just a question of.
You know them getting a level of comfort and understanding.
In being able to to get some of their operations are going again.
Okay.
Okay well.
Keep up the good work.
Nice quarter, and though we wait to hear from you relatively soon on Q1.
Thank you that's shot.
We have reached the younger the question and answer session I will now turn the call back over to Ryan Schram for any closing remarks.
We'd like to thank everyone for joining us this afternoon and remind you that all of ideas investor information is available online on our corporate web site, which is I feel dot com forward Flash dusters.
Everyone here at Ti My idea, please stay safe and say well.
This concludes todays conference you may disconnect. Your lines at this time. Thank you for your participation I have a great evening.