Q1 2023 Presto Automation Inc Earnings Call
Greetings and welcome to fresh store first quarter 2023 earnings conference call.
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A brief question and answer session will follow the formal presentation.
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It is now my pleasure to introduce your host Mr. Chris Whitcomb.
Vice President of Investor Relations. Thank you you may begin.
Thank you.
Good afternoon, everyone and thanks for joining US today My name is Christopher come and I'm, Vice President of Investor Relations here at Presto I am pleased to be joined on today's call by <unk> founder and CEO Raj theory, and CFO Ashish Gupta by now everyone should have access to the company's first quarter 2023 earnings release issued this afternoon, which is.
Also available on the Investor Relations section of our website.
Please note that on today's call management will refer to adjusted EBITDA, which is a non-GAAP financial measure while the company believes this non-GAAP financial measure provides useful information for investors. The presentation of this information is not intended to be considered in isolation or as a substitute for the financial information presented in accordance with GAAP, you're a direct.
To our press release for a reconciliation of such measures to GAAP.
Before we can begin please note that some of the remarks on this call will be forward looking therefore, please refer to the cautionary statement in today's press release for additional details about these remarks I also note that these forward looking statements made during this conference call speak only as of today.
Finally, please refer to today's press release, and our filings with the SEC for a discussion of the risks that could cause actual results to differ differ materially from those expressed or implied in any forward looking statements made today now I will turn the call over to Raj Siri founder and CEO of Presto Raj.
Thank you, Chris and thank you everyone for joining us on our first ever earnings call for breast automation.
We are delighted to share our business momentum and technology progress here with the financial community.
Presto today is benefiting from macroeconomic conditions, resulting in strong interest in our labor automation solutions across the restaurant industry.
Labor cost and availability continue to be a major issue in the U S and physical industries like restaurants suffered the most.
Because they need labor physically present, they can't just hire a remote worker to get the job done.
The problem is acute and the long term trends suggest it will only get worse.
This positions Presto ahead of a very large opportunity as one of the market leaders in labor automation for the massive restaurant industry.
Presto has already won major rollout deals with some of the largest change in the world Checkers, Applebee's, Outback Steakhouse, Chili's, and more which led to nearly 250% revenue growth since early 2019.
The reason we win these deals is because no other player in the market has a platform like ours.
<unk> automation platform combines voice AI computer vision and touch technologies.
These help speed up service types improved labor productivity and enhance the customer experience all the while capturing critical operational data that no other systems can easily capture.
In addition, we make it easy to integrate our leading edge technology, where the restaurants legacy systems and our team is very experienced and implementing and installing solutions that meet the needs of large scale restaurant brands.
I'd like to explain each one of our products now in detail.
Presto voice is our automated AI powered assistant that takes orders at restaurants.
With the rollout of over 200 stores pioneering voice AI checkers, we believe we possess the largest footprint of drive through voice AI in the restaurant industry.
When deployed in the drive thru up to 95% of orders can be taken autonomous by our AI technology without staff intervention.
Unlike a person the system never forgets to upsell and consistently delivers the right language consider the simple line would you like an ice cold drink with that.
A human would find it awkward to say would you like an ice cold drink because naturally we just say would you like a drink, but the AI does exactly what Brad wanted to do every single time. Additionally.
Additionally, Presto voice can save five to 10 labor hours, a day expanding restaurant operating margins by around 10%.
Second our proprietary vision AI can instrument the drive thru to surface. Many more critical operational data point the legacy systems.
Personal vision and real time identifies key gaps in the customer experience as well as opportunities for operational improvement for.
For example, how many cars are leaving a drive through because the way it is too slow and the line is too long.
Deployed in tandem with Presto voice customers vision technology, boosts Upselling and enables voice to deliver the right experience for the right moment for the right guest.
We believe that together Presto vision impressive voice combine to form the most powerful product in the market for drive through automation.
Together, they deliver highly personalized guest experience enhance upselling speed up service.
Labor productivity.
<unk> provide valuable analytics to restaurant brands.
Finally, our legacy business involves touch products, such as guest tablets and server handhelds are tablets allow guests the convenience of ordering food playing games and paying for their type without having to wait for a server.
This not only leads to a better guest experience, but it also frees up time for the servers and therefore helps restaurants deal with the labor shortage.
Restaurants have been able to double the front of house labor productivity with these solutions.
Now, let me explain our go to market sales motion.
<unk> goal is to sign Master services agreements with the top 50 restaurant brands.
Enterprises with global footprints, representing well over 100000 locations to give you a sense of how large our customers are the smallest Brad. We are currently engaged with with up for a high potential pilot is over $1 billion in revenue.
Sure.
Our sales motion involves a pilot test.
In which the technology and business case are evaluated.
Most of our customers have franchisees in addition to our corporate arm and after a successful pilot. We would proceed to an MSA and then rollout with both franchisees and corporate stores.
Our enterprise sales cycle from first conversation to MSA can be six months to 12 months.
Our rollout of cycle can take another 12 months to 24 months on top of that.
So our revenue tends to crest in large successive cohorts as new brands are rolled out and different franchisees rollout this solution to their stores.
Presto differentiate itself not only in our best in class solution, but also in the breadth and depth of our implementation and operating teams.
Strata in the top 50 cannot afford to work with small startup companies, who have never ruled out a solution at scale before.
Top restaurant brands also struggled to work with larger technology companies, who aren't able to deliver the highly customized solutions the restaurant brands need.
Moving onto our recent go public transaction as many of you know we recently completed our transaction with Ventoux CCM acquisition Corporation, which resulted in approximately $120 million of gross proceeds to fund expansion and product development across our platform from strategic investors like Cleveland Avenue, which is run by former Mcdonalds executives as well as many.
Others.
This capital.
<unk> positions us very well to succeed in the public markets and move the company forward to take advantage of the robust macro tailwind.
Next I'd like to talk about some highlights from our first fiscal quarter.
Topline results $7 8 million in Q1 revenue $31 million in annual recurring revenue.
And at the end of Q1, Presto had a handful of high potential pilot install with top 50 brands.
These pilots represent over $200 million and they are on a fully converted converted basis.
This does not include checkers, which is live and was rolled out to over 200 locations.
At the end of Q1 Presto was live with each of these pilots and was demonstrating similar or better statistics, and we are achieving our checkers in.
In each case the brand is savings on labor cost as the system is able to offload the order taking work that was traditionally handled by staff members.
In addition press release voice AI system presents an upsell offer to the guests nearly 100% of the time, we've generated upsell acceptance rates between 25, and 70% of the time, depending on the location.
In this fashion Presto was able to generate material incremental revenue for each location.
Based on the metrics, we are seeing in the customers' need for this solution. We expect that the majority of these pilots will convert to rollout in the coming quarters.
On the product and technology front, we have implemented several enhancements to our voice AI product to increase the stability and performance of our solution in the drive thru.
We have now completed the integration of cyborg opposite to our voice AI product. This was announced in our last filing and provides additional innovation and capabilities to help further differentiate us in the market.
As far as our legacy touch product is concerned our team has been working hard on the next generation platform called Presto Flex.
<unk> been deployed for test pilots in Q1, and we will continue to work out with our beta partners to strengthen the platform in Q2 before launching in Q3.
Finally in Q1, we also hired both the general Counsel Susan <unk> SVP of sales just at Foster. In addition, we've added key AI talent with deep experience in natural language processing and computer vision.
With that I'd like to turn the call over to Ashish for a more detailed review of the financials Ashish.
Thank you Raj and once again, thank you for everyone for joining us today.
I'd like to start by walking through the highlights of our quarter ending September 30 of 2022.
GAAP revenue was $7 $8 million up 8% from prior year Q1.
Yes. It reflects how do you $1 million run rate, which also grew at 8% over the prior year quarter.
We saw an increase both in transaction revenue from higher yields and importantly, new platform voice revenue coming online from checkers wherever.
Wherever you are live in over 200 locations by Q1.
Okay.
Gross profit was in line with prior year and includes residual impact of Covid related equipment replacement and enhancement.
People are required to add temporary resources to better service our customers during multiple waves of the pandemic.
As a result.
NRI, our net revenue retention metric remained over 100% of 105% ending Q1.
We expect margins to expand over time.
In part as we convert pilots into system wide rollouts and additional product led growth.
With both existing and new customers.
This is in part as our AI technologies have a smaller equipment footprint than our legacy touch business.
We expect they will yield higher at steady state margins.
Q1, Opex includes normal operating expenses as well as the impact of various merger accounting and extraordinary items.
Normalized for these onetime costs Q1 fiscal 'twenty, three opex of $9 7 million.
$6 6 million for Q1 in the prior year.
Adjusted EBITDA for the quarter was a loss of $8 9 million as compared to a loss of $5 3 million in the same quarter last year.
The increase in expenses primarily.
Primarily related to staffing in advance of projected growth from new product lines and new brands as Raj mentioned earlier.
As we expand our footprint into both the casual dining and <unk> segments of the industry.
Certain investments.
Related to our new status as a public company.
And higher ancillary professional fees related to the merger.
Other expenses included transaction expense financing costs and debt that we extinguished as part of the going public transaction close in.
Tryst and other noncash expenses related to warrants and convertible notes and stock compensation.
Looking forward we.
Tend to manage our business with a continued focus on our cost structure.
We're also beginning to analyze areas of the business that are more mature like our legacy touch business and where we should expect to achieve operating leverage.
Our objective is to continue to innovate and pursue with topline growth. While also move presto on a path towards profitability consistent with that growth.
Further and as I mentioned above our burn coming out of Covid have had certain one off impact and trailing issue from the pandemic as disclosed in our filings.
As such we expect bearing to settle down and steady state going forward and to deploy new capital primarily in service of bookings growth.
We expect to have adequate runway as we look to the end of our fiscal 'twenty three.
We expect fiscal 'twenty three revenue ending June to be in the $33 million to $35 million range.
In general we intend to only provide guidance based upon signed logos in bookings not sales forecast.
Please note. This does not necessarily mean, our sales cycle is changing or at that we're less bullish on our outlook for the industry.
As evidenced by the active pilots that Roger previewed earlier.
As a reminder, and what excites us about the growth opportunity in front of US is that our customers are large global enterprises, and our technology is mission critical to them and sticky.
With that I'm going to turn it over back to Raj for closing comments. Thank you everyone.
<unk>.
Thank you everyone for attending our first earnings call, we're thrilled to be able to share our journey with you know as a public company I'm looking forward to getting to know all of you.
Yes.
Yes.
Okay.
Okay.
Operator, do you want to.
Pull the audience to see if there's any questions. Please.
Thank you Bill.
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One moment, please while we poll for questions.
Our first question is from the line of somewhat Samana with Jefferies.
Please proceed with your question.
Hey, Good evening couple of questions for me first great to see the first quarter as a public company. Maybe can you just help us understand that.
'twenty three guidance, what's driving the confidence there.
How should we think about may.
Maybe where that could be better or.
Where it could come in line just how should we think about that.
$75 million guidance.
Yeah, I'll start and I'll start and Roger please fill in.
Appropriate so as I mentioned, some odd right, we want to guide cautiously and only project based on the logos.
<unk>.
Signed as of now and bookings by our sales forecast.
So that's just kind of our philosophy on providing guidance phase.
And part of it.
There's also just given in light of the macro environment and sales cycle is getting potentially stretched plus our defect rate getting delayed due to market turbulence earlier, this year, which ship.
Shifted everything out a little bit.
Great and then maybe just.
Follow up just how are you thinking about managing you mentioned.
Investments for growth and there's a lot of opportunity ahead, but how do you think that may be managing opex.
You, obviously raised capital which gives you.
Funds to invest but then as you think about what you just mentioned, but sales cycles and maybe some.
Short term macro concerns just how should we think about the profitability side of that and how you're thinking about what are you managing opex toward IND for in terms of growth expectations.
Yes, yes, so our goal is to manage opex tightly.
As we see revenue crashed in several of these high potential pilots convert into full rollout.
Our goal is to reach profitability.
As soon as we can in managing Opex.
Towards that end only scaling opex alongside revenue growth, it's kind of the.
We look at it.
Yes, and also like the work that I mentioned.
We're now engaged in a starting to look at areas in the business.
Org chart more mature right like our legacy touch business, where we can start to get some operating leverage to.
<unk> in turn then right kind of earned the right to feed the areas of the business, where we expect to see more growth.
Great and then maybe I'll sneak one last one in.
In terms of going public how has that impacted.
The deal pipeline do you think the company is getting more visibility or is it making it easier to compete in deals.
From a public company standpoint.
Yeah, it's been a great. It was a positive surprise, we've seen acceleration in our deal velocity.
Definitely greater visibility from our customers many of which are public companies themselves. They appreciate working with another public company.
They are more awareness now of our value proposition and they feel more confident signing deals with us, which which has been great to see so we're sort.
Are you seeing acceleration in our sales cycles and deal velocity due to the public offering.
Great. Thank you.
Thank you. Our next question is from the line of Stephen Sheldon with William Blair. Please proceed with your question.
Yeah.
Hey, Thanks for taking my questions and congrats on getting at this point.
So just one for me it sounds like you have a lot of encouraging pilots underway.
So I'm curious what factors those restaurant concepts seem to be waived when theyre thinking about a broad based rollout with your voice solutions.
They are these concepts kind of looking at piloting competing solutions from other vendors or is the decision more of a yes or no on this type of technology itself, so whether or not to adopt the voice AI solution.
And what do you think it'll take to convert some of these.
Yes, great question Steven So.
Look.
What everyone looks for when they are piloting this type of solution as Theyre looking to do what we said it will do which is take orders.
With a very high degree of accuracy and not relying on this type of inside the restaurant to take those orders.
And then if.
It does add if it achieves its technology goals do the staff like it is delivering the ROI that that.
They think it can deliver.
Once those two things.
<unk> then we start to see the pull from the group is saying.
These as well as the corporate group.
Fast can we get this out there what do we need to do to move faster on this solution and.
That's really the thing.
For us the competitive threat is not as acute as just people understanding how to leverage a new.
Technology that has really emerging in the restaurant industry for the first time. This year I mean, we're we're the pioneers of the solution we were the largest.
We have the largest footprint in the market already.
So there is.
There is really just.
Every restaurant bad news to figure out how they can get the most leverage out of the solution how can the tailored to their culture and their brand and that's the process that we need to go through I was thinking about how to roll this out at what cadence to roll it out.
Great. Thank you.
Thanks Steven.
Okay.
Thank you.
I would like to ask a question. Please press star one on the telephone keypad.
Okay.
There are no further questions at this time I would.
I'd like to turn the floor back over to the management for closing comments.
Yes, I just want to thank everyone for again for attending today.
We're real excited to be public.
I'm excited to be able to share our progress with all of you folks.
It's going to be a great journey and.
We're looking forward to engaging with you all thank you.
Okay.
Okay.
This concludes today's teleconference. You may disconnect your lines at this time. Thank you for your participation.
Yeah.
Okay.
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Okay.