Q1 2024 Presto Automation Inc Earnings Call
Okay.
Yeah.
Hello, and welcome to Russell automation first quarter 'twenty 'twenty four earnings call.
At this time, all participants on a listen only mode.
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Thank you good afternoon, everyone I would like to welcome all of you to the Presto automation fiscal first quarter 2024 earnings conference call.
Today's call will include recorded comments from our Chairman Christian kept are our Chief Executive Officer interim Chief Financial Officer, Nathan Cook.
After the recorded comments, we will open the call for questions.
A replay of this call will be made available on information to access. The replay is listed in today's press release.
Before we begin I would like to remind everyone that during today's call, we will be making forward looking statements regarding future events and financial performance, including our guidance for fiscal second quarter 2024.
These forward looking statements are subject to known and unknown risks and uncertainties Presto cautions that these statements are not guarantees of future performance.
We encourage you to review our most recent reports or any applicable filings for a complete discussion of these factors and other risks that may affect our future results or the market price of our stock.
Finally, we're not obligating ourselves to revise our results or these forward looking statements.
A lot of new information or events.
During today's call, we will refer to certain non-GAAP financial measures reconciliations of non-GAAP to GAAP measures and certain additional information are included in today's press release.
This press release can be viewed and downloaded from our website.
With that we'll begin by turning the call over to our chairman Christian who kept up.
Christmas if you're on mute.
Hum.
Everyone hear me.
Yes, we can hear you now.
Perfect.
I'm speaking to you today, not only as a chairman of Presto, but also as a founding investor and of course, its former CEO.
I've seen this company go through many phases of change and growth.
However, I have greater conviction and presto today than I've ever had before.
And the proof is in the pudding.
Last week I led a remiss capital affiliate syndicate of investors to make a further $7 million investment Presto all in common stock.
Why did I do that.
It's clear to me that AI and automation technology is gaining significant traction among restaurant operators and I speak to them all the time.
It's also clear to me that we are rapidly accelerating our commercial progress of presto to extend our market leadership position.
And for me, that's most visibly shown by the $17 million number we cite as immediate revenue opportunity and franchisees are brands that we have already signed.
But not yet installed.
So I've said it before and I'll say it again I believe Presto is one of the most immediately actionable and scalable vertical applications of AI today, even though I know it'll take some time to reflect.
Yes.
The market for automated solutions in the restaurant industry is shifting from a lead adopter to a fast follower, one which gives me incredible optimism and energy.
As part of our investment I brought on a couple of entrepreneurial operators to the board in a way that further aligns us towards growth and maximizing shareholder value.
I want to turn my attention towards CEO, Dave Yeager, whom I've worked with over the past four months since his appointment as CEO I've watched Xavier owned the management team the products the business approach.
Sure that we are ideally positioned to capture the immediate opportunity in front of us that I alluded to earlier.
I look forward to working in partnership with him execute our plans at lightning speed and ultimately deliver maximal value for our shareholders.
With that it's my great pleasure to introduce our CEO and my friend, Dave Your casino.
Thank you Christina and thanks to everyone for joining our fiscal first quarter earnings call.
Even that have been previously chief operating officer of Presto.
Well.
Uh-huh directly witnessed improvement.
And automation solutions to our customers.
And our guests dining experiences.
These expenses are energized and empowered.
As we look ahead over both the near and long term.
I Echo <unk>, Additionally, pretty exciting time for Presto.
The market opportunity for festival is enormous and we have every intention of leveraging our market leading products to take advantage of this opportunity.
A key theme of the last quarter has good momentum.
We delivered a game changing shifts and sales departments and technology advancement in a systematic manner, which sets us up to deliver on our ambitions for 2024.
We provide further details on all three of these as I provide my business overview.
Over the next few minutes I intend to cover the following.
First a recap of the plan that I laid out in our last earnings call and the progress we've made in delivering against those things.
Okay.
Achievements over the last quarter as well as the market opportunity available to us.
And finally, an overview of our plans and ambitions for the year.
It is incredibly important to me and we deliver against our targets and ambitions that we communicated to our customers and investors.
So when Alaska Europe months ago outlined by robust plan for the business, which had three key goals.
Scale the festival business in a sustainable way.
Continue to engage with a customer base of leading restaurant brands and our guests.
And the focus on reducing our operating expenses and cash burn.
And I am proud to say that we've already started delivering against all coes.
Let me first talk about scheduling Presto voice.
As I mentioned before.
A step change in the scaling of our Voyce business over the previous quarter.
So far this quarter.
Led by our Breen Chief revenue Officer, Justin Foster.
Time for new franchisees with a total of 365 locations we fully expanded.
They are also saying one major corporate pilot with over 2000 global locations, where price is the sole lender.
This progress indicates the size of the revenue opportunity within our existing customer base and the pace at which we will be able to add to our pipeline of future deployments.
What's more our speed of deployment.
<unk> has increased significantly in the past few months.
Under the leadership of my Fantastic County Councillor Glyn.
The operations team has accelerated the pace of new store deployments.
Curious meaningful way.
We're now deploying a new store every business day, and we expect this pace to accelerate further in the months ahead.
A lot of success has come from a significant reduction in the lead time for installation and introduction of new hardware.
Most recently, we successfully went live with a new franchisee inside <unk> dates.
PVC, that's taken us months to get from signature to go live.
International and the progress we've made in boost of unemployment is contributing to the fact that our hoist products is outlined in over 400 locations across the United States.
With a healthy pipeline of new departments currently being executed on.
So now let me turn to reducing operating expenses.
While we aggressively pursued the substantial market opportunity available to US is also essential that we ensure the business is run in an inflation and strategic manner.
We are dedicated to insurance and your investments in <unk> are carefully deploy to deliver maximum shareholder value.
With this demand over the past two months, we have executed on a clear and rigorous reduction in operating expenses.
While the same time delivered accelerated growth.
Thank you Bob.
As a result, we've now reduced our global full time employee base by approximately 17%.
This initiative along with other cost saving measures, we reduced expenditures by around zero point $4 million per month.
Rising to approximately $1 $2 million per month in the middle of calendar 2024.
This reduction will not impact our spending our festivals.
Now, let me turn to the business and market opportunities and provide you with further details on why we're so excited about this opportunity for festivals.
Okay.
There are about 130000 pricing.
Severance restaurant restaurants in the United States.
Approximately 56 million people in the U S and Canada visit twice a day.
With the average American one.
And $200 annually at the drive through Lane.
Im just curious how restaurants are and we continue to be a core part of American culture. However, while robust. Thank Ravi <unk>, our industry faces and married up operating challenges, including increased labor costs, which have historically accounted for 30% of sales in restaurants.
The other major challenges are the need to generate higher average order values through upsell and being able to achieve higher efficiency in breakthrough to enhance the guest experience and increase revenues.
Preston voice, so its challenges and drive ROI for our customers to labor optimization additional revenue through a sale.
Susan and accurate order. Thank you.
The culmination of these customer benefits and the sheer scale of the North American market.
The reasons why the addressable market for Crystal voices is estimated to be in excess of <unk>.
<unk> annually.
Of that $3 billion, we estimate our current approach of a revenue opportunity is about $100 million annually.
That estimate represents the total revenue from locations of restaurant groups.
Which we have a master service agreement.
But what we do not have yet deployed presto voice.
Good morning, Mike is that demonstrate the success of our sales team to date.
Also the exceptional near term revenue opportunity, which exists in this market for us to target.
Capturing this opportunity will be made possible through our market, leading technology, which comprehensively address the key challenges of restaurant operators.
And seamlessly integrates into their restaurants existing technology stack.
Turning to our guidance for 2024.
We're seeking to accelerate our rollout of Presto voice across locations that are expandable and approachable.
Listing agreements with both restaurants and franchisees.
Our goal for 2024.
<unk> 1200 drive thru locations.
Going to more than 2600 by the end of.
2025.
What gives me great confidence in this growth strategy is the acute needs of the.
With our industry.
According to our technology solutions.
The continued support of our investors.
With that I would like to hand, it over to our interim Chief Financial Officer to review our financial performance for Q1 2024.
Thank you Xavier and once again, thank you everyone for joining us today.
It's a pleasure to speak with you today as the interim Chief Financial Officer Preston automation.
Joining the team last month and I look forward to building on the strong trajectory press Joe is on in helping to scale the business.
Today I will walk you through our fiscal first quarter results and then cover our guidance for fiscal second quarter of 2024.
I will talk about certain results on a non-GAAP basis, and we show a reconciliation to GAAP measures in our recent press release, which is available in the Investor Relations section of our website at Presto Dot com.
For the fiscal first quarter of 2024, we reported revenue of $4 $9 million, which is in line with the previous guidance of $4 $8 million to $5 million.
<unk> revenue platform revenue decreased to $2 1 million as compared to $4 8 million for the prior year comparison.
The decrease is primarily attributable to lack of upgrades to the presto flex by certain franchisee customers with the corresponding lack of hardware revenue that would be associated with those contracts.
It should be noted that this decline was expected and factored into the previous guidance.
Transaction revenue decreased to $2 8 million in Q1 as compared to 3 million for Q1 of fiscal 23.
This is primarily attributable to contract terminations by certain franchisee customers of existing enterprise and small business customers.
Actually offset by increases in pricing for our gaming fees. This decline was also expect isn't factored into the previous guidance.
Q1 fiscal 'twenty four operating expenses were $13 5 million compared to $14 7 million for Q1 in the prior year down primarily from a decrease in salaries and employee benefits expenses as a result of a decrease in head count.
And as previously mentioned by Xavier we have taken strategic steps over the past year as well as in just the past week to reduce operating expenses and our cash burn.
This is part of our goal to get the business to profitability combined with voice fueled growth.
We will continue to focus on closely managing our head count in vendor costs, along with the streamlining of our operations to allow us to maximize the rollout of new voice AI locations.
On an adjusted EBITDA basis for the quarter, we had a loss of $8 8 million compared to a loss of $8 9 million in the same quarter last year.
And lastly, now I'd like to finish with our guidance for our second quarter of fiscal 2024, we expect fiscal second quarter 2020 for revenue to be between $4 eight and $5 million.
That concludes our prepared remarks. Thank you all for joining us today, and we look forward to continuing the dialogue as we move forward through the remainder of fiscal 2024.
With that Xavier Christian and I are ready to take questions.
Operators. Please open up the lines for any questions.
Thank you.
Ladies and gentlemen, as a reminder to ask a question. Please press star one on your telephone and then wait to hear your name announce.
To withdraw your question. Please press star one again.
Please standby, while we compile the Q&A roster.
Our first question comes from the line of Mike Latimore with Northland Capital markets. Your line is open.
Alright, great. Thanks very much.
Yes, it's great to see the the deployment acceleration there can you just elaborate a little bit more on <unk>.
Why that's occurring.
How much is it.
Do you have to devote more resources to this or is it more from your customer side.
And if it further accelerates what what are some of the drivers of that.
Yes, I'll take that question of things for your question, Mike. So I think the speed of deployment is something that we've been focusing on for quite some time now, but finally were.
I think benefiting from all these efforts in speeding up.
The deployment, how many locations we can deploy into on a weekly basis and <unk> three as a result of I think three key.
Key initiatives.
One.
We've invested.
In our processes and making sure that when someone is ready to sign we can bring them online on our solution.
Weaker than ever before so I mentioned earlier that night. It now takes 16 days 60 business days between the signature of a contract with your franchisee and seen their first location go lives and that's that's.
And in part due to better processes and better resources internally.
The other important aspect of this is that we've made some pretty good improvements to our hardware our hardware is.
More stable and more comparable with the assistance of a.
A typical drive through and that helps because you.
Definitely when I come up with some sort of cookie cutter process and hardware for four bringing those locations online.
Was it a big part of it and then finally, we have a healthy backlog of locations to install.
With these new franchisees that we signed over the quarter. The backlog is going to continue to improve and that really helps with the pace of deployment.
Alright, great.
And then I think.
The other plan has to improve.
Improve automation by.
Over time, but I think getting about 50% by June of 'twenty, four I guess what.
It gives you confidence in being able to improve the automation is it just.
Internal R&D or is it just having more interactions on your platform for trading models or like how do you get confidence in the further automation here.
Again, I think it boils down to three things. So first of all our investments in AI are again picking up.
We learned a lot over the last 18 months.
In building, our AI ml U and integrating that with.
The heat will human in the loop.
<unk> of our solution and that is paying off I would say the other thing is the accumulation of data that we use also.
As a way to train the AI, even further and make it more and more efficient over time and then I would say also the experience that we had with our systems are currently processing orders live on a limited basis autonomously and so we think that we will be able to.
Chris the accuracy over time up to the level you mentioned and also make this solution a scalable to the all the locations that we have in Florida.
Great and then just last one I think you mentioned.
Being at 1200, plus stores by the end of 'twenty four I just want to confirm you mentioned that and then does that does that equate to $25 million or so of <unk> how.
How should we think about the <unk> level.
Store level.
Yes, so the 1200 number is.
The target number for the number of installed location for Presto voice by the end of 2024.
Alright.
<unk> focused on that and relatively confident we'll hit that number based on the traction that we're seeing we have.
Few things that are helping us, especially.
Especially here in California.
These new laws that.
We are increasing the minimum wage and putting a lot of pressure on these operators to adopt technology to further automate their drive through and then I will say that when it comes to revenue projections, we do not share.
Forecast for the year.
You know the numbers.
For the company are basically up to you.
We will.
We will do everything we can target to 100 locations inventory 600 by the end of 2000 2025.
Yes.
Great. Thanks very much.
Thank you.
Please standby for our next question.
Our next question comes from the line of Brian Dobson with Chardan capital markets. Your line is open.
Hi, good evening.
You undertook a significant workforce reduction and raised capital.
Did your investors dictate that you take that action before they committed that capital.
No no. They didn't so these changes these operational.
And our reductions are in operation operational costs are.
Very thoughtful step the management team took to really align the business with the.
The future growth and our future needs.
We're focused on Presto voice.
This is our future.
We continue to invest in.
More R&D more deployment processes and really.
Prepare the business for 2024, and 2025, which is going to these two are going to be big years for us.
Excellent and I certainly agree that the voices.
The future of the company and I guess to that point do you think.
That you could give us a little bit of color on the level of human intervention in your voice AI product and.
And how you expect that that might change over the next year and also do you have.
As you see it Matt do you have the capital necessary to continue to improve that product.
Yes, good question so.
As you know our solution uses a hybrid of AI automation and then humans in the loop to deliver the maximum accuracy in terms of taking orders at the drive through and this is important because our customers really value the accuracy of our solution and then the speed of service. This is really important for them and it's important for us.
Yeah.
So over the last 18 months, we've been investing in bringing more and more AI to do the automation end to end and take orders autonomously.
At this time.
Less than 30% of the orders are taken autonomously by the AI, but this is something thats, improving and we're targeting about a 60, 50% automation rate autonomous C. I think by the end of <unk>.
Of the second quarter calendar quarter for 2024, and this portion you are going to keep increasing overtime as the AI gets better and also as you know we're more efficient.
<unk> in.
Allocating those human resources to work with the AI.
Yes.
How do you expect the margin too.
To change either.
Scaling back on your on your human intervention resources, or you're simply not needing to grow those as you add new restaurants.
Yes, so we're expecting margins to improve as the need for humans is less and less.
And the.
There's two levels of margin improvement one is the efficient allocation of those human resources right.
You want to be.
Efficient in using <unk>.
Labor is not too expensive, but also allocating resources properly across a wide range of stores.
That's one and then the second one is you want to use the AI to take more and more orders autonomously and then overtime and we I think we calculate this internally is something that we will achieve within the next two years overtime reach traditional gross margin that you would expect from a company in our space.
<unk>.
Yeah. Thanks, and then do you think you could give us an update on client renewals within the touch business.
How you feel about.
That unit as Youre heading into year end it could be your year.
Your lender agreement.
Yeah.
Yes, so as you probably saw from our previous filings we have three.
Main customers on the touch side.
One of them.
The contract ends on December 31 of.
Of this year 2023 kind of a 2023. This customer has asked for an extension through the end of March of 2024, then we have another client who's comfort is coming for renewal at the end of February of 2020 for Gander and then finally, the third client.
Also extended until June of 2024.
We have a pilot for flex hardware for that last plant. We also have a claim.
Like I said two of our three clients that are already ask for extensions.
For us the important thing right now is to focus on on voice.
On voice and really Dizzy.
Decide how to what path to take to maximize shareholders value on the touch side and so we're considering a number of options. We still have not adopted a specific alternative what we know is that 2024 youre going to be the the year off Presto voice and Thats really how were.
Thinking about resource allocation at this time.
Right, but your agreement with Metropolitan Partners will require you to wind down that business. If you don't get all three of them carry new by the end of the year right.
So if I can just jump in for a second there I mean I think.
Our agreement with Metropolitan requires us to have a plan.
Sort of.
Dress the touch business I think everyone understands and with limited resources at the company, we need to make some choices.
Best in voice.
But I think we are ultra focused and I think.
Alton.
In agreement here that we want to maximize value for shareholders and there is a lot of different paths of doing that.
Have a great product and flex we have a product that I've spent a lot of time talking to customers with that really.
On the product.
And so how can we sort of enable that value proposition to flourish in a way that maximizes shareholder value without distracting us or taking away resources from Presto voice.
<unk> of <unk>.
Strategy in corporate finance, and it's something that we're working through and working through right now.
But it is a it is a sort of joint.
The strategy that we've developed with the board as well as with Metropolitan.
Yeah very good thanks for that color and how long will you have to develop that plan.
Third client doesn't doesn't renew by year end.
I think we are.
I believe there is no time like the present, we have very high conviction in.
We need to do both the voice and attach and we are in the process of executing against that and I'm sure you'll hear more from us.
Great. Thanks very much.
Okay.
Thank you.
As a reminder, ladies and gentlemen that star one to ask the question.
I'm showing no further questions in the queue I would now like to turn the call back over to Keith for closing remarks.
Thank you very much that concludes the Presto automation fiscal first quarter 2024 earnings conference call. Thank you all for your participation and we would encourage you to please do refer to our latest press release further details many thanks and good evening.
Ladies and gentlemen, this concludes today's conference call. Thank you for your participation you may now disconnect.
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