Earnings Transcript for OTMO - Q4 Fiscal Year 2021

Operator: Good afternoon, ladies and gentlemen. Thank you for standing by, and welcome to the Otonomo Q4 End of Year 2021 Conference Call. At this time, all participants are in listen-only mode. There will be a presentation followed by question-and-answer session. [Operator Instructions] I must advise you that your conference call is being recorded today. I would now like to hand you over the speaker, Miri Segal, MS - IR. Please go ahead.

Miri Segal: Thank you, operator, and thank you all for joining us today. Welcome to Otonomo’s fourth quarter and full year 2021 conference call. Before we begin, I would like to remind our listeners that certain information provided on this call may contain forward-looking statements. And the Safe Harbor statement outlined in today’s press release also pertains to this call. If you have not received a copy of the press release, please download one from the Investor Relations section of the Company’s website. Today’s call will be accompanied by a PowerPoint presentation. You’re welcome to view the presentation on Otonomo’s Investor Relations website. Following the call, a replay of this webcast will be available on the Otonomo’s Investor Relations website. Please also note that we will present during today’s call non-GAAP numbers, which are historical non-GAAP financial measures. A reconciliation of these measures to most directly comparable GAAP financial measure is included in our press release. Changes in business such as competitive, technological, regulatory, and other factors could cause actual results to differ materially from those expressed by the forward-looking statements made today. The Company’s historical results are not necessarily indicative of future performance. Therefore, we can give no assurance as to accuracy of Otonomo’s forward-looking statements and assume no obligation to update them, except as required by law. Today, we’re joined by Ben Volkow, Co-Founder and CEO of Otonomo; Bonnie Moav, CFO; and Amit Hammer, Executive Vice President, Operations of Otonomo. Ben will begin with a review and an update of the business. He will be followed by Bonnie, who will give us an overview of the Company financial results. Then, Amit will share insights on the Company’s mobility intelligence activity since the acquisition of Neura. We will then open the call for the Q&A session. During the Q&A session of this call, Ben will be joined by Bonnie Moav, Amit Hammer and Doron Simon, Executive Vice President, Strategy and Corporate Development. With that, I’d like to pass the call over to Ben Volkow. Ben, please go ahead.

Ben Volkow: Thank you, Miri, and please move to slide 3 in the deck. Hi everyone and thank you for joining Otonomo’s fourth quarter earnings and end of the year conference call. Today’s presentation will provide a high-level summary of the year’s events, a review of recent business development and further details regarding the growth of our new mobility intelligence activity. Please move to slide 4. Looking back at 2021, progress can be seen all across the board in our organic growth, investments in our platform and technology, strategic acquisitions, scaling our go-to-market, Company growth and strong market engagement. This has been critical as we lay the foundation for the ecosystem and unique solutions Otonomo offers. We continue to see strong growth drivers via capital investments, partnerships and acquisitions in the sector that demonstrate that our strategy and vision are in line with a large opportunity before us. Please move to slide 5. From a growth standpoint, our revenues increased by over 4x in 2021. We are encouraged to see that this initially modest revenue growth was driven by a wide range of use cases, customers, and vertical segments. We believe this is a strong testament to the potential of our business model. We signed six OEM agreements which increased our total number of OEM agreements from 16 to 22. These agreements include new OEM agreements and extensions with existing OEM partners, and are pivotal to providing vehicle data that will lead to a new generation of services and capabilities in the industry. The additions to our OEM partnerships in 2021 increased the number of addressable connected vehicles for Otonomo by 25% or from 40 million to 50 million vehicles. We have partnership agreements with 7 out of the top 10 automotive manufacturers. We also added dozens of new customer engagements, including customers such as LeasePlan, OBI+, WeatherOptics, and SWAT Mobility. As you are aware, Otonomo publicly listed on NASDAQ in August to accelerate our growth and broaden our access to capital markets. Shortly thereafter, in October, we acquired Neura, Inc. Neura provides Otonomo with several key strategic elements, access to over 400 million additional data endpoints, both AI and analytics talent and workbench, and the ability to diversify our solution offerings to address a greater total addressable market and to accelerate market adoption. In the fourth quarter of 2021 Neura contributed to our revenues as expected. We see a strong market response to their AI technologies and solid pipeline for 2022. A little later during the call Amit Hammer, our newer COO and currently EVP Operations at Otonomo will share more about our mobility intelligence activities. Please move to slide 6. Finally, we are growing the Otonomo team. Our employee base nearly doubled the 2021, enabling us to have key development capabilities and scale our go-to-market strategy. We also added several new members to our leadership team. It brings the experience and capabilities we must have to achieve our ambitious goals. Now, I will turn the call over to Bonnie Moav to provide more details on our 2021 financial performance. Bonnie? And please move to slide 7.

Bonnie Moav: Thank you, Ben. Revenues for 2021 are more than 4x year-over-year from $394,000 to $1.7 million. Growth was driven by our new mobility intelligence activities, new customers and new OEM agreements. We also experienced COVID-19-related impact that resulted in an increase in revenues, contributed by mobility intelligence activity, focused on population health. Before I move further into the numbers, I want to remind you that our non-GAAP items include stock-based compensation expenses, depreciation, amortization of acquired intangible assets, and merger and acquisition related expenses. Our non-GAAP information is presented excluding these items. Please move to slide 8. I will now turn to the detailed financial results for the quarter. Our GAAP operating loss was $16.2 million, compared to $4.6 million quarter-over-quarter. The increase in the GAAP operating loss was mainly driven by the acquisition of Neura, doubling our headcount year-over-year, and expenses associated with the cost of becoming a public-listed company. In the fourth quarter, non-GAAP operating loss was $13.8 million, compared to $4.3 million in the fourth quarter of fiscal year 2020, a 223% increase. This is driven by the same reasons mentioned before. Our cost of revenues includes the cost we pay to our data providers, including the OEMs for their data using our products and remain the same level compared to the fourth quarter 2020. Our cloud infrastructure mainly consists of cost related to the third-party cloud services, which increased by 262%, from 297,000 in Q4 2020 to $1.1 million in Q4 2021 due to our increase in the amount of data we ingest, process and store, and the amount of data used by our data consumers, which grew from Q4 2020 to Q4 2021 by more than 250%. Our research and development expenses, and our sales and marketing expenses for the fourth quarter 2021 continued to increase by 130% and 214%, respectively, compared to the fourth quarter 2020, mainly due to the accelerated workforce growth of more than 200% in each department, including the acquisition of Neura. General and administrative expenses for the fourth quarter of 2021 were $6.2 million, compared to $0.8 million in the same period a year ago, representing an increase of over 680% year-over-year. As mentioned earlier, this is mainly as a result of the expenses associated with our SEC registration and the cost of the Company becoming publicly traded, additional headcount and the acquisition of Neura. Please move to slide 9. Our cash position at the end of the year was $208.1 million in cash, cash equivalents and restricted cash, an increase of $180.3 million, which was primarily driven by proceeds received from our SPAC merger. In 2022, Otonomo will continue to focus on the growth in revenues, OEM partnerships, expand the diversity in the solution we offer and expand our partnerships including into new geographies. Otonomo expects to announce its guidance for 2022 by the end of March. Now, I would like to hand over to Amit, our EVP, Operations and the former COO of Neura. Amit will share some insights into the mobility intelligence activity over the last quarter.

Amit Hammer: Thank you, Bonnie and Ben, and hello to everyone on the call. Please move to slide 10. In the next section, I’ll provide an update on the progress of the post-merger integration of Neura, the new mobility intelligence business in Otonomo. I’ll talk about how we see the synergy is growing and how we see the traction in the market. The rationale behind the acquisition of Neura was to create a powerful mobility intelligence platform that fuses connected vehicles, mobility and transportation data into actionable insights in order to deliver increased value to our customers, partners and the ecosystem. With the Neura acquisition, Otonomo has added a great team of more than 30 experts in data science, big data analytics and mobility intelligence with proven experience in building solutions for transportation, Mobility-as-a-Service and smart city. Please move to slide 11. Neura broadens and diversifies our data assets and enriches our mobility insights by adding data layers, such as mobile device, mobility data, demographics, EV charging stations, micro mobility, public transportations and more to our core automotive OEM dataset. Through the acquisition of Neura, we also moved the IP assets of Otonomo through dozens of proprietary mobility intelligence algorithms, developed Neura and successfully deployed with customers. We also added 11 registered patents in the fields of big data and mobility signals analytics. The execution of the merger has been completed and we are experiencing synergies and positive results earlier than expected. We have already launched three new solutions focused on EV charging point operators, Mobility-as-a-Service provider, and transportation planning. Please move to slide 12. The first solution is focused on electric vehicle charging point operators. The platform enables operators to determine where to deploy EV charging sites to maximize return on investment. For example, we recently signed a deal with a global energy company focusing on EV charging station deployments. The customer is undergoing a rapid global expansion. One of the main challenges they have is planning the market extension in a way that will bring the highest return on investment for each charging point deployed. With Otonomo’s EV intelligence solution, based on mobility data and connected vehicle data, they were able to gain insight into which areas would have higher demand for EV charging and plan their market expansion accordingly to optimize a high return on investment. Please move to slide 13. The second solution targets Mobility-as-a Service, MaaS providers. The platform delivers greater visibility into the actual demand for mobility services, enabling these MaaS providers maximize ridership and their operational efficiency. Another example of the impact of our solution is a recent deal signed with a leader in the micro mobility space in Latin America. This got the most requires big data insights in order to plan expansion and alternate its fleets in cities across Latin America. They have been using Otonomo’s MaaS intelligence solutions to identify mobility patterns, multimodal demand, and areas of high demand and thus deploy their services accordingly, maximize ridership and optimize operational efficiency. Please move to slide 14. The third solution focused on smart cities and transportation planners. Our platform enables transportation planners to generate insight into mobility demand patterns. This enables them to match community needs and preferences and thus build the right infrastructure and better deploy and optimize mobility resources. We recently signed a deal with a global mobility and transportation company, consulting cities around the world on transportation systems, mobility management and environmental impact. Please move to slide 15. We are already experiencing positive results from the acquisition of Neura. Neura received significant operational results from Q3 to Q4. We increased the number of mobility intelligence customers we serve by 60%. And we have doubled the number of geographies we serve. In our mobility intelligence, Q4 revenue was the highest to-date. In summary, after our first quarter together, we can certainly see how the combination of Otonomo and Neura holds great promise for the mobility and transportation sector. This success drives us to continue our journey and to empower organization across the mobility, transportation and automotive ecosystem to drive strategic data-driven decision. Thank you. Ben, back to you.

Ben Volkow: Thank you, Amit. Please move to slide 16. Like all of you, we have seen a number of announcements in the last few months from OEMs sharing their data strategy and its impact on their future revenues and business growth. We see the continued electrification of OEMs fleet and the introduction of data services and APIs. And we continue to see benefits of operating across the transportation and technology sectors via acquisitions in the ecosystem. For example, Stellantis announced a pivotal role, data and services are expected to play in their business operations and activities in the future. It aligns well with our strategy, and of course, our interactions Stellantis group. It is clear that data and its associated services are taking a central position in the growth and evolution of the automotive and mobility sector. This trend supports with our vision and strategy. So, in looking ahead throughout 2022, the following five strategic priorities will be our core focus. Continued growth in our OEM partnership, as well as increasing diversity in the solutions we create and geographies we serve. Further development of our mobility intelligence offering. We are very excited by the great engagement from the market and are building a strong product and sales pipeline. The fleet sector, McKinsey analysts expected market opportunity to be approximately $70 billion by 2030. Our software-defined, cloud-native fleet, multi-data, multi-vendor solution delivers one API, one integration, one data dictionary, and of course, one billing and one contract. Our strong customer facing team is ready to support these efforts. We have high expectations for this segment, the fleet segment, in 2022, and intend to secure further partnerships and growth. Demand for personalized data services is expected to continue to increase. There will be a greater spotlight on personalized data use cases, powered by richer data sets, more customer value, increased transparency for drivers and advanced mobility services. Business growth in segments, such as insurance and financial services in 2022 is focused to grow rapidly. In the partnership arena, 2022 is expected to be marked by the increased value and revenue generated by our current partners. Additional partnerships and collaborations are in process, and we hope to share development, as we move forward that will assist us in making our vision a reality by expansion of our marketplace. I want to touch upon one partnership from Q4, our relationship with NXP. NXP is a leading hardware provider in the automotive edge space with strong value and technological proposition. In this collaboration, we announced we provide an end-to-end, edge-to-cloud offering, wherein the Otonomo vehicle data platform will orchestrate the millions of NXP edge devices, embedded in vehicles. These devices enable energy saving, privacy, security, cloud and data transportation cost savings. We are extremely excited about this unique and innovative collaboration that is supposed to impact the market. Please move to slide 17. In summary, as our time today nears to an end, 2021 and especially Q4 saw rapid growth in our financial and company KPIs. Revenue grew more than 400%, which much of our business coming from recurring revenue. The number for OEM agreements, customers, licensed vehicles all went up rapidly. We remain confident that our vision and the market are aligned, and we remain positive on Q1 and 2022 as a whole. Thank you all for your consideration. Miri, over to you.

Miri Segal: Operator, we’re ready to take your questions.

Operator: Thank you. [Operator Instructions] We have a first question. It’s coming from the line of Josh Nichols from B. Riley.

Josh Nichols: Yes. Thanks for taking my question. And good to see the 400% revenue growth for the fourth quarter coming in above the guidance. So, I know one of the big companies early stage, right? So, there’s a lot of different KPIs. One of them clearly being these OEM contracts, 6 new OEM contracts signed in ‘21 to ‘22, I think it is. What’s the target that you’re thinking of potentially for hitting that KPI for 2022? I think you’re going to add 5 to 10 new OEM partnerships this year or is there a potential to do more than that as you expand or what’s the thought process?

Ben Volkow: So, when we look into our OEM strategy, I think that we will slightly adjust it or change it in 2022, and I’ll explain. I think initially, the focus for us was on quantity. We wanted to open the shop, we needed to have the coverage, and it was important for us to bring as many OEMs as possible, and that’s the right thing. I think that in 2022, we see -- we started seeing some gaps in our coverage. In some areas and some geographies, maybe we have slightly less vehicles. In some areas, maybe we missed some specific parameters that we see requests in the market. In some areas, maybe our coverage for fleet, which is our fastest growing segment, is lacking. So, we will be moving more towards quality than quantity. And as part of it, we started sharing also the number of top 10 OEMs we have engaged with, right now it’s 7 and we aim to get to 10. So, there’ll be more emphasis on the quality of the data or the location of the data and how it fills our overall strategy instead of getting as much data as possible. I think that the numbers of 5 to 10 in new agreement or extension to agreement is in our ballpark and aligns with our strategy. But I think those won’t be just 10 agreements with every OEM or any OEM, but we have very clear targets and specific emerging orders for the team when they’re approaching and talking to OEM. I hope this answers the question.

Josh Nichols: Yes, I think, I got it. So, I guess, you’re focusing more on the top 10 out OEMs specifically, especially like the 3 that you don’t have those, or the key focal points for ‘22 is to increase penetration there?

Ben Volkow: Yes. I think that those we believe can make a bigger impact compared to smaller OEMs. We have some small OEM engagements and targets, but very few to our needs when it comes to our data, so exactly.

Josh Nichols: And then could you -- what was the split between marketplace and SaaS if you have that? And I’m also just kind of curious how much of the revenue was recurring for the fourth quarter or 2021, if you have that handy by chance?

Bonnie Moav: Hi Josh. Thank you for the question. It’s Bonnie, I’m going to answer it. So, basically, we decided not to move -- to not count SaaS and marketplace on a separate -- as a separate segment. We are offering all the OEMs and the data consumers that we have. Our product offering, whether it’s different use cases, different SaaS services, whether it’s marketplace or licenses to the OEM or mobility intelligence product that Amit mentioned on the call. So, we are not giving the breakdown of this mixture of those split. In terms of recurring revenues, we grow our recurring revenues compared to last quarter. We are much focusing and we are building our offering now to have a growth in our recurring revenues. So, we will be showing recurring revenues if any SaaS company growing it from quarter to quarter.

Josh Nichols: Thanks. And then, when will the 20F be out, with the more complete financial inflows? Is that coming soon?

Bonnie Moav: So, we are required to file it by the end of April, but we are aiming to file it by March 31st.

Josh Nichols: And then -- so, I wanted to ask a little bit, so the Company -- you’ve doubled the sales force, right? So, what’s kind of the lead time to get a lot of these sales guys up to speed? And, I guess, how much revenue is the sales team expected to generate for 2022 on a per person basis? Like, what are their KPIs? How are they being paid? Is it based on new contract revenues that they’re bringing in? And what are the expectations there for the new hires and sales marketing team?

Ben Volkow: So, we -- it’s a good question. So, I will say that it’s very important for us to bring people from the industry. Their ability to ramp up and onboard faster is definitely advantage. We started with our CRO, Anders, that I think came to us after close to 20 years at TomTom, dealing with data. And the rest of the team is also people that are coming from the industry. We brought someone from the fleet sector to lead our fleet business. We brought additional people with data background to lead some other engagements. So, we see people coming on board and going through the training and starting to be effective in less than a month, and we are working all the time to improve it. And the team is measured on number of things. But I will say that we give a lot, a lot of weight these days to booking, not just revenues, very important for our growth, very important for our future years’ revenues. And the team is not just being measured on closing deals and getting revenues, but also on making sure that they are recurring revenues. And I hope it answers the question. Was there another part to the question?

Josh Nichols: No. I think that’s it. And then, last question for me is that, I guess, I’m just curious why you’re waiting until March to give 2022 guidance. Is there one or two large potential deals that you think are in the works that could materialize in the near-term that you are waiting to get better visibility on? And also, I think last call you talked about there was a potential Mitsubishi renewal agreement, but I didn’t hear any commentary about that. Is that still influx, or what’s the expectation there?

Bonnie Moav: So, we see the market very dynamic at this point. We made an acquisition. We are very optimistic and we want to see that we can get the best of the acquisition and to see the synergies between the companies. We decided to wait a little bit more into the quarter and to come back with a value number by the end of Q1. I know it’s a little bit of disappointment for you. But, it’s not far away. So, be patient with us.

Operator: [Operator Instructions] We have the next question. It’s coming from Ryan Koontz from Needham & Co. Please ask a question.

Ryan Koontz: Some of these new OEM partners, can give us an idea how long it typically takes to onboard these new OEM agreements to turn to full access to the data? Are we talking months typically or maybe kind of walk us through what that process looks like? Thank you.

Ben Volkow: So definitely, and I hope you are well, Ryan. I think that for us, typically there are always, many, many OEMs. We have about 22 different agreements. So, there is a spread there. But typically, I would say that the legal engagement with an OEM, when it comes to the commercial discussion, the privacy related discussion, the agreement itself takes today 6 to 9 months, depending on the OEM. And it used to be almost double this. I think, we improved, I think the OEMs are improved and it’s still really 6 to 9 months. Afterwards, the actual onboarding of the OEM usually takes two to three weeks on our side. And every OEM has data that is slightly different. And every OEM’s anonymization requirements that are slightly different. When we are talking about data with PAI, consent needs to be in place. Again, every OEM has slightly different implementation of the consent management. So, the technical side of adding a new OEM takes us two to three weeks usually. Actually, you do it once and you and you don’t need to do it again, you have the OEM on-boarded. But, that’s the process, six to nine months overall.

Ryan Koontz: And one quick one, if I could, on the sales side. What do those sales cycles typically look like from engagement to contract to revenue typically in couple of quarters?

Ben Volkow: It’s a good question. I think that as you know, we are closing number of the industries with our data. We approach the fleet industry and we approach the insurance industry and we approach with aggregate data, smart cities, DOTs, SMBs et cetera. So, I think there are slightly different timeline in different industries. And I think that when we are talking about aggregate data, like smart cities, like DOTs, like parking solutions, we are talking typically about, I would say three to four months from the first call and a contract. We just closed the deal after a week now, but that was really an unusual one. When we are talking about personal data use cases, like with insurance, like with fleet, many times it goes through a POC first. So, we are talking about slightly longer term, I would say five to six months compared to three to four months. And those are the timelines we see in the industry. I think they’re slowly becoming shorter. And with more maturity on our end, with more maturity on the other side, and with better operational and legal foundations, but those are the times today, three to four months with aggregate data, and five to six months from first call to signing an agreement when it comes with a more complex personal data use cases. I hope it answers the question.

Ryan Koontz: It does. Thanks. Very helpful. That’s all I had.

Operator: There are no further questions at this time. I will now turn it back to Ben Volkow for closing remarks.

Ben Volkow: Thank you all for joining today. And we will be happy of course to elaborate and answer any further questions. With this, we will wrap up for today. Thank you and have a good day everyone.

Operator: Ladies and gentlemen, that does conclude our conference for today. Thank you for participating. You may now disconnect your lines. Thank you.