Q2 2023 Near Intelligence Inc Earnings Call

[music].

Good day and thank you for standing by welcome to the near Intelligence Second quarter 2023 earnings Conference call. At this time all participants are in a listen only mode. After the speaker's presentation. There will be a question and answer session to ask a question during that session you will need to press star one.

One one on your telephone you wouldn't hear an automated message advising that your hand is raised to withdraw. Your question. Please press star. One again, please be advised that today's conference is being recorded I would now like to hand, the conference over to Marc Griffin Investor Relations you mean it.

Hello, and welcome to the New intelligence second quarter 2023.

Hello, and welcome to the near Intelligence second quarter 2023 earnings call.

Today, we'll be discussing the results announced in our earnings press release issued after the market closed yesterday.

With me on the call today are no Matthews, Chief Executive Officer, and Rahul alcohol, the company's Chief Financial Officer.

The primary purpose of today's call is to provide you with information regarding our second quarter 2023 performance and offer an outlook for our third quarter 2023.

Certain statements made on this call that are not historical facts, including those related to our future plans objectives and expected performance are forward looking statements within the meaning of the private Securities Litigation Reform Act of 95.

These forward looking statements represent our outlook only as of the date of this conference call. While we believe any forward looking statements made on this call are reasonable actual results may differ materially because of statements are based on our current expectations.

Subject to risks and uncertainties.

These risks and uncertainties are discussed in our filings with the SEC, including our most recently quarterly report on Form 10-Q.

You should refer to and consider these factors when relying on such forward looking information.

Any forward looking statement speaks only as of the date on which was made and we do not undertake and expressly disclaim any obligation to update or alter our forward looking statements.

Whether as a result of new information future events or otherwise.

As required by applicable law.

I encourage you to visit our Investor Relations website at investors thought near Dot com.

To access our second quarter earnings press release, SEC reports and the webcast.

Today's call.

During the course of today's call, we refer to certain non-GAAP or adjusted financial measures.

We use these non-GAAP financial measures to review and assess our performance and for planning purposes.

These non-GAAP financial measures should be considered in addition to not a.

Substitute for or in isolation from GAAP measures.

Additional information about these non-GAAP measures, including a reconciliation of non-GAAP measures to comparable GAAP measures is included in our press release issued after the market closed yesterday and is available on our website.

Finally, unless otherwise noted all financial comparisons on this call will be made to our <unk> or fiscal year 2022 results on a historical basis.

And with that let me turn the call over to her now.

Welcome everyone and thank you for joining us today.

We are pleased with our execution during our first full quarter as a public company.

Second quarter revenue was $17 7 million.

Point of our guidance range.

But net revenue retention for culture continues to be greater than 100%.

And came in at <unk> 12.

More importantly, we were able to achieve our revenue target while maintaining discipline.

Our cost structure, resulting in an adjusted EBITDA of negative $5 1 million for Q2, which was better than expected.

We continue to remain focused on improving our year end adjusted EBITDA results.

For some of our newer listeners I would like to briefly review how our products work highlight our go to market strategy and then review some of this quarters highlights.

EMEA solution brings together different types of data to help our customers understand people and places better.

Our customers use us in full to make smart decisions in their marketing or operations.

This means they can learn more about their customers and figure out things like where to open new stores or how to attract more people to their businesses.

Now, let's revisit our three core pillars.

Data privacy and AI.

These pillars work together to elevate our solutions to unparalleled hiked.

First up data.

This is what makes me a standout.

We have worked hard to gather the best data around its unique to us and really massive.

The piece, taking investment we have made in refining data quality and scope, it's a bedrock upon which our AI modules are trained.

With strong data, we are helping companies make better decisions.

The second pillar privacy is super important to us.

It isn't just to watch it.

It's a guiding stuff in here.

We know that being a trusted data company means we need to protect people and our customers privacy.

Our products medical actually crafted.

But privacy, leading tools affording us the honor of being the unparalleled source of people and places intelligence.

Lastly, AI.

We've been using AI for 10 years now.

Just like our secret sauce.

Our platform uses AI to do cool things like answering questions and regular language and helping us find trends in the data.

Looking ahead, we're getting ready for a big shift we generally react.

A transformation, that's about a shake industries, including our own.

We foresee a proprietary data emerging as a strategic differentiator setting us apart as we train our models not really to unearth invaluable insights, but also to bridge knowledge gaps all while safeguarding the secret tenants of privacy.

To sum it up near the power comes from data privacy and working together.

We believe the convergence of high quality proprietary data regenerative AI and ever changing regulatory compliance landscape will give us an even greater advantage in the future.

Our goal is to maximize data utility while protecting privacy.

We believe our high quality data, coupled with generative AI will put an end to having to choose between the value of data and compliance.

A good example of the power of our combination of data privacy and AI is a customer to accretion and mapping and research services company, providing a range of offerings to the retail focused commercial real estate industry, such as retailers property owners and brokers.

Good accretion has helped us real estate clients to identify customer demographics.

Analyzed treatment areas and Thats, just cannibalization risks to make informed decisions.

<unk> market strategies and closed real estate transaction using nears privacy fifth platform, resulting in almost 488 successfully completed projects.

Before discussing our quarterly highlights I want to review our go to market strategy and how we will accelerate our growth in 2024 and beyond.

Okay.

Our Gtx strategy has been a land and expand model.

We target a small specific use case in one geography division and then through superior execution.

But to expand to more use cases to other geographies and additional divisions within a large company.

A good part of our customer base is large multinational corporations.

<unk>, we can provide solutions across the globe with the strength of strength of our massive data universe of $1 6 billion unique user Ids across 44 countries.

Which means these customers have significant expansion opportunities.

Our go to market strategy also relies on a mix of direct sales and channel partners.

To unlock the full potential of our data and obtain optimal outcomes.

Integration of diverse systems into an activation platform.

Visualization tool, our personalized dashboard demands reasonable enrichment and professional services.

Fulfilling this crucial requirement for our customers, we rely on our value channel partners to deliver these indispensable and strategically significant services.

Since our inception, we have placed significant emphasis on technology and the development of a robust data platform.

This journey has been facilitated by our AGM and streamlined that exceed strategy complemented by robust sparkling water both of which have been instrumental in shaping our successful land and expand mythology.

Apparently catalyst driving our decision to go public has been the imperative to amplify our direct sales force bolster sales support infrastructure and allocate the necessary resources to fortify Irobot general pricing its machinery.

In preparation for our transition into a public company, we proactively made strategic investments to strengthen our direct sales force led by dynamic new leadership team.

By the close of 2020 to our dedicated team of sales Representatives had grown to 25 complemented by an additional 50 experts providing exceptional pre and post sale support.

This remarkable expansion represented an impressive search of approximately 100 per cent compared to our figures in 2021.

And our aspiration for high aligned with our commitment to growth.

However, as a thriving young organization, we recognize the importance of striking the right balance between ambition and prudence.

While we celebrated the commendable progress up numerous new team members, we acknowledge that certain etfs experienced.

Emissions performance, primarily stemming from a need for enhanced support and comprehensive training initiatives.

In response to those observations.

We embraced opportunity for refinement.

While the initial tragic treat anticipated nine months ramp up period for apps, we adapt to new realities and trending towards a year long expectation.

This adjustment reflects our dedication to ensuring that each team member is well equipped for success and that they received the guidance needed to flourish.

In alignment with our commitment to optimization, we undertook a strategic restructuring process to align our sales organization with the scale of our pipeline and the evolving needs of our value channel partners.

This evolution included the establishment of a cutting edge channel partnership team.

<unk> focused on specific verticals.

These patient policy innovation, what's drawn from our achievements within the tourism vertical further emphasizing our commitment to innovation and excellence.

As we embrace these transformative changes will be there.

Remain steadfast in our pursuit of excellence nurturing a sales force that embodies our dedication to delivering exceptional value to our customers and stakeholders alike.

Let me run through some quarterly highlights.

As mentioned earlier, expanding our utility and use cases within our existing customers is a leading driver of our business, which you can see in our net revenue retention number.

Last quarter, we mentioned the large European retailer, who signed on a few years ago with a six figure subscription that expanded greatly in 2022 to a seven figure deal.

In Q1 of 2023, not only did they renew the seven figure <unk> contract the expanded yet again to an eight figure deal.

We were pleased to execute on that expansion during Q2 2023 and continue to operate as an integral part of their operations.

Over time, we are investing in Verticalizing, our solutions with the help of our partners who have built strong practices focused on a particular niche.

One of our strongest political is tourism.

We worked with over 50 major travel destinations globally, including New York <unk> company as well as Hawaii tourism.

Last quarter, we mentioned that tourism partner in New York State that continued to expand the number of points of interest that we offer.

And your clients.

During Q2, it was the breadth of our tourism partners that collectively what a strong driver of new revenues.

In summary, we're very pleased with our second quarter results and our ability to continue to execute on our initiatives, which you believe will drive a strong 2023.

With that let me turn the call over to my colleague, Rob Hello grew up.

Thank you Anil.

For the second quarter of 2023, GAAP revenue was $17 $7 million.

At the midpoint of our guidance and up 19% year over year.

Revenue from subscription customers came in at 89% of our topline revenue.

Net revenue retention are in R&R, which measures our success in retaining and growing revenue from our existing customers was 112% in the quarter.

We have seen this number fluctuates from quarter to quarter and the second quarter.

Was in line with our expectations.

Now looking at some key profitability metrics.

GAAP gross profit was $12 1 million in Q2.

A 68% gross profit margin.

Our long term GAAP gross profit margin is expected to be relatively steady in the 68% to 72% range barring any unusual items.

GAAP operating expenses were $28 $2 million in Q2.

This included stock based compensation of $5 1 million.

And one time transaction related expenses of $3 2 million.

Given the revised focus on sustainable and profitable growth.

We have work on rationalizing our cost structure, bringing in further efficiencies.

We expect our operating expense structure to remain fairly stable over the next few quarters.

GAAP operating loss for Q2 was $16 1 million.

And GAAP net loss was $17 7 million.

non-GAAP operating loss for Q2 was $7 8 million and non-GAAP net loss was $9 $4 million.

Adjusted EBITDA loss for Q2.

It was $5 1 million.

Slightly better than our guidance.

Looking at the balance sheet.

We ended the quarter with $54 $1 million in cash and cash equivalents, including restricted cash.

Our total outstanding debt based on GAAP.

As of June 30 was $101 3 million.

Subsequent to the quarter close the company came into an agreement with its senior secured lender blue plus category.

To prepay a portion of the total outstanding debt.

Sales of which have already been filed publicly.

<unk>.

Our Q2 accounts receivable balance was $23 2 million.

$2 million reduction from the first quarter.

Accounts receivable balances remain elevated due to delayed collections.

We expect our balance to normalize before the end of this year.

Moving to our outlook.

For Q3.

Currently expect revenue to be in the range of $18 million to $20 million.

Adjusted EBITDA is expected to be in the range of negative one five to negative $2 5 million.

The company will need to raise additional capital in order to fund operating and investing cash flow needs and to satisfy its minimum liquidity covenant under the financing agreement.

Which provides that the company may not permit liquidity to be less than $20 million.

While we have been continuing to execute on the business front to mitigate the risk of fundraising.

And the management have prioritized focus on executing towards profitable growth.

In summary.

We continue to execute well.

Delivering top and bottom line results as per our forecast and guidance and believe that near remains well positioned.

<unk> maintained its momentum and operating discipline throughout <unk> and beyond.

And now I'd like to turn the call over to the operator for questions operator. Please.

As a reminder to ask a question. Please press star one on your telephone and wait for your name to be announced to withdraw. Your question. Please press star one again, please standby, while we compile the Q&A roster.

And our first question will come from Mike Latimore of Northland Capital markets. Your line is open.

Alright, good morning. Thanks.

Quarter results look very good here.

I think you had mentioned that tourism vertical was strong in the second quarter just wanted to clarify that.

As you look at the pipeline are there any particular verticals that.

We will drive.

Second half bookings here.

Hi, Mike.

Thanks for the question.

Yes, the tourism vertical has been strong for us.

Typically tourism has been a very strong vertical for us in the past as well.

What.

A lot of big customers.

We could only mean few there, but a lot of the customers that we work with the.

The other vertical that you see that's working really well for us is property, which is real estate.

And of course, we see good traction around all the time.

Alright.

And you had mentioned that you ended 2022.

About 25 salespeople.

Kind of sounds like Youre, making some changes I guess, how many salespeople do you currently have.

<unk>.

To clarify if there is changes there it sounds like maybe youre, making that up.

With more channel management, perhaps.

Yes, so what we have done is.

Like I had mentioned we actually.

We looked at how do we create verticalizing approach and tourism was one of the examples that I gave so we clear today.

Channel partner team, which.

Goes to market.

Clearly looking at these verticals.

Today, we and that resulted in in.

The number of reps changing from 25 to 20 globally at the moment.

Okay got it.

And then just.

I know youre, giving third quarter guidance here I guess in terms of fourth quarter is there any seasonality there positive or negative P&L tied to marketing or protocols.

How do you generally think about fourth quarter seasonality.

Sure Ralph.

Yeah sure Hi, Mike So typically we've seen fourth quarter.

Either flat or higher than third quarter at this stage.

Moving on to guidance given the.

Well that is being done.

Capital raising.

And are you looking on the overall deal structure, but we don't.

The fourth quarter to be.

Lower than Q3.

Great.

One last question on AI can you give an example of.

Our generative and aligned.

Yeah.

Improving the user experience so our capabilities are in your pipeline.

Yeah of course, so generative AI.

One of the reason we're so excited about this is.

Is and I touched upon this earlier as well.

If you look at the farther far training moderates is actually dig it out superior data and we're sitting on a lot of that.

So you would see.

<unk> being implemented in many aspects of our offering and I don't think there'll be any offering that will be untouched with back okay.

In the future.

Immediate things that you would see coming up is.

One is because we get lot of data.

There is at which is used to understand consumer journey that is still gaps in this journeys. So generally bad allows us to actually plug in these gaps.

And give a fuller picture of.

Consumer journey without sacrificing practices, but.

So that's that.

That's one of the big things that you would see coming from us.

Okay, great. Thanks very much.

Thank you so much Greg and one moment for our next question.

And our next question will come from Mark <unk>.

Of the benchmark company.

Thank you Neil and ROE.

Just so I'm clear here so initially.

Specifically on your direct Salesforce initially you had targeted 25.

And now you are targeting.

'twenty is that reduction based on.

Your measures to stay closer to profitability.

And how is that impacting.

Your pipeline if you will.

Looks like your guidance for <unk>.

At the low end implies flat sequentially. So just curious if that is result of a change.

And your direct sales force count start there. Thanks.

Thanks, Marc for the question. So the way to look at this is obviously, we are realigning to market realities.

These.

Folks at book.

Talk about the 25% to 20 is more.

Moved from one.

One focus too they're focusing more on channel approach channel partner approach, so rather than going direct to market and I think that we have seen because what we have seen in the past the channel partner approach working really well for us, which I touched upon in detail as well because the channel partners that are bolt II.

To provide additional services on top of our offering which becomes a lot more valuable and stickier for our customers. So.

So we are.

I would say leading little bit more towards that channel approach than the direct approach in based on where the market is shifting and how we are seeing that the sales cycles are getting longer and things like that.

The pipeline for our direct sales still remains strong.

And like you.

<unk> seen that in the guidance.

For this.

This quarter is primarily because we obviously have a big focus on on profitability by next quarter.

That becomes.

A priority for US now a wholly owned asset.

That was it so just reiterating yes studies.

Bob.

There is some realignment on the overall good expectations given the.

The core focus on profitable interest enable growth.

So it will have some short term impact, but overall I think we are trying to make sure that we still grew at a healthy run rate.

Hawaii, becoming profitable that could be the goal for the next two quarters.

Okay.

Or are you still expecting.

Do you expect I should say, an IRR to improve through the balance of the year.

And then secondly, do you still expect adjusted breakeven adjusted EBITDA breakeven by fourth quarter. Thanks.

So the EBITDA breakeven is definitely going to be the most important aspect but.

With respect to <unk>.

Yes.

We're not expecting it to go down we hopefully we have seen some incremental.

And our uplift.

In the second quarter over the first quarter, we expect that momentum to continue.

Okay, Great and maybe just one follow up on the.

The channel partner realignment.

Are there new channel partners that you are.

Utilizing now or are these existing channel partners.

No they are unusual partners.

There are new channel partners, yes, so basically it's a <unk>.

Combination of obviously.

Working closely with existing channel partners.

And adding your partners as well so you would see that we have added.

I know there are.

A significant partner in Europe , and we continue to add new partners.

Okay. That's good to know thank you very much.

Of course.

This concludes today's conference call. Thank you for participating and you may now disconnect.

Okay.

[music].

Okay.

[music].