Earnings Transcript for OTMOW - Q3 Fiscal Year 2021

Operator: Good day and thank you for standing by. Welcome to the Otonomo Business Update for the Nine Months Ending September 30, 2021 Conference Call. At this time, all participants are in listen-only mode. After the speakers’ presentation, there will be the question-and-answer session. [Operator Instructions]. Please be advised that today's conference is being recorded. [Operator Instructions]. I would now like to hand the conference over to our first speaker today, Miri Segal, CEO of MS-IR. Please go ahead.

Miri Segal: Thank you, operator, and thank you all for joining us today. Welcome to Otonomo's nine months 2021 business update 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 earnings 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 is accompanied by a PowerPoint presentation. You're welcome to view the presentation Otonomo’s Investor Relations website. 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. Our historical results are not necessarily indicative of future performance. Therefore, we give -- we can give no assurance as to the accuracy of our forward-looking statements and assume no obligation to update them, except as required by law. Today, we're joined by Ben Volkow, CEO and Co-Founder of Otonomo. He will start off with an update of the business. Following his prepared remarks, we will open the call for the question-and-answer session. And then Ben will be joined by Bonnie Moav, Chief Financial Officer; 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: Hi, everyone, and thank you for joining Otonomo's third quarter business update conference call. Today, the presentation will focus on recent developments and elaborate on our unique technology and offerings. I will also discuss market trends and our vision. Please go to Slide 3. Otonomo is building the world's largest mobility ecosystem powered by data and intelligence. Data and its associated insight are the foundation for the future of mobility. Our task at Otonomo is to make sure that data intelligence is shared, democratized, and used to support this future. Silo of data is not valued. Data that cannot be analyzed is not value. The value of data flourish when you share it, use it, understand it and capitalize on it. The power and effect of data in the mobility space are extreme, and can be felt across the transportation and automotive industries and enterprises end sales. The future of automotive and mobility and ecosystem is fueled by data. It's a grand vision, but it's already our reality. And it's Otonomo's mission to bring it to global scale. Moving to Slide 4, I'd like to quickly explain what we do since it's our first quarterly conference call. And I feel that we have new investors on the ride with us. Otonomo fuels the data ecosystem of OEMs, fleets and more than 100 service providers, spanning the transportation, mobility and automotive industries. In Q3, we successfully signed two new OEM agreements, beginning our total number of contracts up to 21. This represents hundreds of types of data attributes. The total number of connected cars as of Q3 reached over 40 million vehicles. This translates to more than 4 billion data points being generated till date, which our platform uses to support our revenue segment. Among them fleet also result with B2B, aggregate data used by smart PCs and marketing companies and personalized data for sales and services like users-based insurance. At the moment, Otonomo has two granted patents and another gained in the new acquisition. There are total of 28 patents pending, 24 from Otonomo and 4 more from Neura. With the new acquisition, we added not only amazing technology, strong IT and a topnotch technical team, but also access to data and insights from 430 million mobility devices. These opens Otonomo platform to last mile devices, with ability into open area activity such as micro mobility and a detailed understanding of the automotive and mobility intersection. As you can see, we are moving in big steps to realizing our vision. I will move to Slide 5. I'm sure that most of you are familiar with the term case. Analysts see the future of mobility within these 4 segment model, CASE stands for, connected, autonomous, shared and electrified. They are clear leaders in autonomous, shared and electrified areas. Otonomo is very a definitive leader in connectivity. We enable OEMs to share data and intelligence from their connected vehicles and their all ecosystem benefits from the resulting diverse mobility-related or mobility-based services, drivers, riders pedestrians, city sites, city trains, all benefit. I'm delighted to share that Otonomo is in discussions with these companies mentioned on this slide and others. This is another proof point showing the value we unlock for the different segments of mobility. Slide 6. We are well-positioned for what is to come. Otonomo has a very strong technological base powering our data platform. Our data supply is a leader among the industry shifts, diversity and need of access. As we mentioned before, data is a fuel of the industry, of our business and the foundation for our growth. We have a built truly competitive offering with unparalleled values. We have an extensive and growing correlation of OEMs providing us data. Our ecosystem of data consumers and channel partnerships is also growing. We have a strong balance sheet that supports our business trends for the next years to come. All this clearly puts us in a full position to push the mobility industry forward with our data and mobility intelligence tools. I’m moving to Slide 7. Solid and profitable partnerships are top priority for us, and an integral part of our go-to-market. These relationships are a win-win, providing value for us. The quotes here on this slide are a sampling of some of our current partnerships. We have shared information in the past about AWS and Salesforce partnerships and some of the others. All of which we are very excited about. There's a lot more to come here. We look forward to sharing news about upcoming new partnerships in the near future. Slide 8. We are seeing traction in these areas for our data and intelligence. The first one is infrastructure and smart cities. We've see more and more cities and infrastructure support organizations such as DOTs using data to reduce costs and optimize further infrastructure and urban traffic. With the recent Biden announcements, we expect even more traction and more budgets coming in. It's amazing to see how the power of data, the power of connected cars can really short cycle and bring so much value in this domain. We see also more and more requests around traffic optimization and transportation planning. One of the rising segments is everything around impact and ESG initiatives. For example, understanding carbon footprint in areas of OEMs or fleets to understand their carbon footprint using car data. This is almost a segment that was non-existent until a couple of months ago and now it takes more and more of the center stage. EV adoption is one of our fastest growing segments. Electric vehicles are on one side creating a lot of data because they are based on new architecture, or data [we’re taking on board] from the beginning. And in the same time, the ecosystem, the EV ecosystem requires a lot of data for optimization to understand for example the queues in the charging stations, to understand the health of different charging stations, to understand that where to deploy a new charging station, to understand the effects on the power grid et cetera. We really see a booming amount of requests in this segment for data and intelligence. The last and not least is the fleet management sector. We talked to you in the past about how using data we really revolutionize the fleet sector. The fleet sector based on McKinsey prediction is expected to grow 60% by 2030, because of electrification, because of autonomous, because of number of the reasons. This is a huge blue ocean and we are coming with a new offering that is wasn’t available until today, helping fleet and fleet management companies to move to a SaaS model, to a software model, using the embedded modem in the car instead of an aftermarket device. Moving on to Slide 9. I want to share with you some of the main growth trends that we see. To give you a bit more visibility into some of the changes we see in the market. We see automakers shifting towards personalized services. It was always a choice that some -- different automakers took different risks. Some automakers prefer to jump into the data waters with aggregate data, some of them prefer to jump into those waters with personalized services. We definitely see the personalized services taking more and more of the stage. We see more and more automakers, more and more OEMs preferring to start with personalized services. There are a number of reasons for this, and we will be happy to elaborate. We see also rising demand for diversified data types. It’s in the old days, what the industry was expecting from connected cars, floating car data, what is also referred to as FCD, which is a very basic and very limited data set. Today, the demands are much higher. Traffic signs, algos, friction data, ultrasonic data, battery data, fuel related data, all on the table and are all requested. It's great to see that industry understands the power of the data, the diversity, and how much things can enable. And we see this resulting in growing demand to reach at that state, which for us is someone that has such a variety of data parameter is great to see this vision happening. The third point multi-brand offering for B2B and B2C. B2B and B2C is of course personal data use cases. And we see this ecosystem coming and demanding a multi-brand offering. Because if you talk to insurance company, if you talk to their fleet, they will tell you that they have many, many OEMs in their fleet who handle their insurance coverage. They have the GMs and Toyotas, the Fords, the Stellantis, the Audis, et cetera. They need the multi-brands. They don't want to go OEM by OEM, contract by contract, API by API, data share dictionary by data dictionary, they want multi-brand support. And again, this is part of the value that we bring, masquerading the different OEM complexities and offering it as one unified data set, one unified dictionary. I will move to talk about some intelligence trends that we see. And with new acquisition, we are now aided to offer intelligence and not just data through our ecosystem. The first to mention is the demand for aggregate-based intelligence. We are facing growing amount of privacy concerns. And privacy for us is another one priority, to make sure that it’s never jeopardized, that is being respected. In the end, we are all drivers and we want to treat our customers the same way we want to be treated. Having the ability to offering intelligence, insights, analytics, next-to-the-road data enable us in many places to overcome and end the recent privacy challenges. The ability to provide the dashboards and not erode data enables many of our ecosystem partners to get the insights they want without having to deal with complex privacy challenges. I mentioned before that we see automakers shifting towards personalized services. As part of this, we see also OEMs are asking for data intelligence partners. Either they prefer to share sometimes intelligence instead of grow data with third-parties or they own the ability to understand their data better. OEMs are generating huge amounts of data. It’s not an innovation project anymore. It's something that is big part of their business. It has a huge potential and also huge cost. They want to understand better the data to so they can utilize and benefit from it. And again, with our mobility intelligence capabilities, we are able to offer them more insights and understanding of their data and the business associated. I’m moving to Slide 10. As recently announced, our new acquisition in Q4 expanded our capabilities and intelligence offerings to unprecedented vehicles. We doubled our total addressable market to about $140 billion. The intelligence offering has been analytical insight layer and value for our customers. This results Otonomo to serve as a one-stop solution for connected car data and AI-based analytics. This value we expect to materialize in our two revenue streams, the data marketplace and our SaaS portfolio, as we gain more and more market share, and the markets and OEM contracts mature. Please join me on Slide 11. I'd like to discuss some of the added mobility intelligence solutions that we have been adding with the new acquisition. We empower transportation planner with insights into mobility needs and multi model demand, which is necessary for the planning and building of active and an effective transportation networks. By delivering up-to-date actionable mobility insights, we can support data-driven decisions that create accurate, measurable and meet the local network design. We also boost EV charging stations. This is going through a process of electrification by optimizing the location selection and utilization or charging station deployment which of course maximizes ROI and services flexibility. This capability was highlighted at MOVE London, the leading mobility event where we had active discussions with prominent electrification peers. Data-driven electrification planner gain access to accurate measurement of demand for EV charging in every point of the city, with precise mapping of low battery zones across primary EV corridors, and better understanding of EV mobility patterns. In addition, we have fleet and mass providers increase their operational efficiency and ROI by unveiling clusters of demand, which leads providers to make supply and demand through optimized station locations, reallocating their resources and rebalancing their fleet. In addition, I want to highlight that Neura brings much more to Otonomo than its amazing technology. Their assets include a strong and fast growing order book, accelerating business engagement and topnotch engineering and data science teams. We already have OEMs as customers for the Neura technology, utilities and power companies as customers for the Neura technology and smart cities and mass providers that are using the Neura Mobility Insights technology. So we are very excited from the traction we see and what is coming. We've been really getting great feedbacks from the market. With this acquisition, Otonomo provides the data privacy consent management tools, roll application-ready data and analytical more fledged, delivering actionable intelligence. Looking at Slide 12, we can see the strong momentum for signing key OEM contracts continue. We have 21 OEM contracts. Five of them were signed in Q2 and Q3. We also added three data extensions to existing OEM agreements to support wider data partnerships. We are very proud of those new agreements. Five new OEM agreements in six months is not a walk in the park. And the extensions is a sign that our OEM partners are happy from the collaboration, they see the value we bring, they extend a vast potential for their business and they keep supporting us farther and farther in building the joint thesis. Our pipeline is growing also in parallel to the data supply. This represents 60% growth in aggregate data revenues opportunities and a 70% increase in fleet activation opportunities. This is moving in line with our business trend. Those are some of the KPIs we are using to track the business progression. This is clear indication that the maturity of the market increases quarter-over-quarter, and that our business trend is on target. Now onto Slide 13. Here are a few more metrics on the business that we wanted to share. The sales team is growing fast to meet market demand across geographies and industries. We would be happy to move faster. But we try to maintain quality and not compromise on talent. Having said that, we recently made swift hires with vast industry experience. For example, our new CRO that has joined us from TomTom recently. During Q3, we have made some significant additions to our sales and go-to-market team, adding key tenants with vast industry experience. Setting the time to choose the best talent, we continue to expand and grow this team putting us on the direct path to accelerate future growth. Our product team has more than doubled the sales to support our products roadmap. We are bringing to market and growing set of competitive tools. You can see the increase in recent engagement. It's really going through the roof. This is a result of our effective and extensive forward leadership activities. Our brand activity is generating an increasingly engagements across all social media channels. I’m moving to Slide 14. Here is an additional look at Q3. To give you some more visibility to the progress being made. Fleets, strong engagements for our unique offerings with year-to-date engagement growth, which is more than 20%. We shared in the last few months the partnership for example, with LeasePlan, continue to thrive and kicking with cars, getting data and generating revenues, and this is one example. The Salesforce partnership, we are delighted about it. We have forming strong collaborations. We are running multiple titles, and adding some very exciting industry changing discussions. We hope to share more news in the near future. Strong OEM growth, we've shared with you that we signed five new agreements in the last six months and also three extensions to existing contract. We have number of additional OEM contracts in the legal redline status that we hope to sign and announce soon. Mitsubishi Motor Corporation, we are in discussions with Mitsubishi regarding entering into a new commercial arrangement that will align with the technological and market needs of both parties. In the meantime, our vehicle data marketplace agreement and IoT Hub Software License Agreement both unique in their contract structure are no longer in place, while we welcome a big addition and collaboration. I'm moving to Slide 15. Here on Slide 15 you will sight four priorities that are guiding our near-term activities. Those are things that we are doing every day. We are working on increasing our channels. This will enable us to turbocharge our go-to-market play. Our OEM relationships play successful with the cloud and we work hard to maintain our partners’ trust and build relationships with new automakers in new geographies. Carrying our partner organization in the right way will enable us to meet market demand. Launching new features and additional mobility intelligence tools will ensure that we continue to be on the cutting edge and provide strong value through our ecosystem. Thank you very much. Operator, we are ready for the Q&A session.

Operator: [Operator Instructions]. The first question comes from the line of Josh Nichols. Please ask the question.

Josh Nichols: I wanted to ask a little bit about the integration with Neura. I know it's been only a little over a month. But when do you think the company is going to be releasing some of its AI solutions to your existing OEM and channel partner base? And I know it's not going to be a major revenue contributor this year. But could you elaborate on some of the opportunities and expectations for '22 and potentially beyond?

Ben Volkow: Hi, Josh. And thank you for the question. So really we announced the acquisition of Neura about five weeks ago. But of course we've been working the trenches and the due diligence process for many weeks before. It’s going well on plan. It's a bigger firm with [no fair game]. They are based in Israel, 18 miles from our office. We've been working together and having discussion before. So there aren't many surprises. We see strong demand in the market, even more than we anticipated. We really were planning to take it in baby steps and we see push and pull from the market and the sales teams. We see a lot of excitement from our ecosystem from the ability to offer not just the road data, but also are of intelligence on top. It gives our ecosystem the ability where we think it also work our way and also the focus under one roof, where both the data and the intelligence enables really deeper insights. It's not something that you can get when you get those two from different places. So, it's almost -- give us almost a unique positioning in the market. I hope it answers the question. And if there’s a follow-up, happy to elaborate in more detail.

Josh Nichols: No, thanks. That provides some good clarity. And I was going to ask, you talked a lot about end markets and a lot of big opportunities that you guys are starting to touch on there. What one or two end markets are you seeing the most early stage traction in today that you think are going to have the quickest adoption and potential to kind of scale the early revenue model over the next year or so?

Ben Volkow: So I will try to pick one from the personal data side and one from the aggregate. They're all my sons. I think that on the personal, it’s definitely fleet. It’s a strong offering. It's clear values to the fleet management companies to move from hardware to software and pay only for the data you consume, there's no downtime, you don't need to install anything. There are no surprises. And the SaaS model increases staffing that moves forward nicely. We mentioned the LeasePlan software, which is I think is the biggest leasing company on the planet about to-be owned cars, generating revenues with -- and growing very nicely. There are many other fleets that we hope to be able to share names in the near future. That's one segment. If I need to take another segment, I will talk about everything around smart PCs and transportation management. We have seen budgets moving in and booming our speed and our size. And I believe that Otonomo possess a quite unique deficit and positioning. On one side, we have very diversified data that goes beyond connected car data and supports new use cases. And on the other side with our ability intelligence, we are able to provide not just the data, but also a dashboard or a summary that does a lot of the digesting that’s need to be done on the secure DOT side, and then the fact that we can really take the needle out of the haystack for them. So those are two examples, I hope which answers the question.

Josh Nichols: Yes, thanks for clarifying that. And then if you can kind of elaborate a little bit. I just -- so you're in discussions with Mitsubishi, right? Previously, you had an agreement in place that's not in there now as you work to kind of expand that to potentially broader vision, as you mentioned. Does that have any like revenue impact to the quarter for the first nine months of the year, expectations for 4Q? I did notice that obviously your guidance for the year is kind of heavily fourth quarter weighted. I'm just curious if you could elaborate on that impact and also what's kind of implied to get to the 4Q revenue jump of $700,000 to $800,000 or so?

Ben Volkow: So the -- it’s probably something to agree with. Mitsubishi are a SaaS model customer. And we provide them the -- our IOT app, which enables them to walk and enjoy the benefits of data and the value of data before we source such [indiscernible]. Now that they're putting the infrastructure in place, they asked us to open the contract and discuss if we can help them with different or additional data model to adjust to the new architecture and also to add additional markets to the collaboration. In the meantime, we increased our existing contract while we work with the new one. There's going to be a revenue impact, but this revenue impact is already baked into the focus that we share. So the numbers that we shared are basic numbers for the year. And of course, the associated numbers that you can understand from that for Q4, already take into account the Mitsubishi changes in contract. We view as something positive that they see additional value and want to work with us in order to adjust and benefit from this value. And we hope to share in the coming few weeks updates on the status of the account, offering really that we're doing -- going together towards bigger and wider vision together.

Operator: [Operator Instructions]. The next question comes from the line Jack Andrews from Needham & Company.

Jack Andrews: Ben, I was wondering if you could talk a little bit more about your IP, you talked about -- you've got the two patents that are granted. And I think you said, you have 28 that are pending. Could you help us think about the significance of these pending patents? Are there some that represent a potential catalyst for you in terms of ability to monetize your platform?

Ben Volkow: Hi, Jack. It's a very good question. I am [indiscernible]. So questions about technology is always something I'm waiting for. So from day one, we invested a lot in technologies. We understand that being a new company, starting a business, being a startup, one of the only advantages you have one can bring to the game initially is the technology. And we invested in building a larger tech team and building a lot of technology and protecting our IP. And the patents we have granted and the patents pending are all in core areas of the business. Some of it by the way, I think could be found on the web, some information. It's in areas, for example around anonymizing data in dynamic measures to adjust to different road conditions or geographies or density. It's in areas that are managing the consent, really giving the flexibility to adjust to different data and privacy regulations. And it's in areas of how we normalize the data. And it's not an easy task to think about 10s of millions of cars sending data every couple of seconds and there may be no time to translate it all to one-one language, one API. I hope it answers the question. I can also -- as we said before that we added some more IP with the Neura acquisition around the way they use AI and machine learning in order to create a mobility intelligence. They are able to create predictions into the future and not only into using data to the instance where you’re standing now, but also prediction into the future. The last may be to mention which is important and jumps out is around privacy. We have a strong patent there, where we have the authentication of drivers to make sure that really -- when someone sends this data, this car, we have right to verify that it's really the person in the car, and clearly who they are. I hope it answers the question Jack.

Jack Andrews: Yes. Thanks for sort of fleshing out the areas of your portfolio. I appreciate that. Maybe just as a follow-up question. Just given the slowdown in global auto production in general, could you just update us on insurance-based opportunities? I'm trying to think of whether that's a use case that would seem to be a potential demand for that independent of what's happening with auto production?

Ben Volkow: So, I think that the markets for UBI have been slowly inching up in over the last few years. And I believe that COVID has helped to accelerate further. People weren’t driving a lot and they want to pay their forward premium when the car is in the parking. So, the UBI, usage based insurance was a good path forward. And we are moving in this path and we have a number of pilots running on both sides of the pond. And I cannot -- I don't see an impact because of the shortage of vehicles that comes to mind on this segment in particular. I can only choose to tell you that it's not helping the business overall. But we don't see any instrumental effect at this stage from cars being shipped out, and I think that we are in such a big blue ocean that for us the growth opportunities are so vast and it's not something that I can say has instrumental impact on the business today. I hope it answers the question.

Operator: Thank you. The next question comes from line of Josh Nichols from B. Riley. Please ask the question.

Josh Nichols: Yes. Thanks. Just had a follow up. I know you've been working on providing some updated financials. You gave some info for the first nine months and more detailed info about, I think the first half of the year in a filing recently. Is there going to be a Q out or is it going to be a more comprehensive release, probably not till after the year with the annual reports? And just want to clarify -- because I know you've made some updates to guidance, is there any changes to the company's like '22 to '25 model that you previously discussed or that's still unchanged?

Ben Volkow: So, I'll let Bonnie, our Chief Financial Officer to answer this.

Bonnie Moav: Hi. Thank you. So with respect to the first part of your question, as we are in the early stages of revenue generation and also this is the first quarter for us being a public company, our focus is long-term with a clear tactical plan, which to-date has already made good growth. So we measure our growth and we know growth can be quantified with several different KPIs other than just revenues, especially for a company like us in new market. And we will not share more than what was shared by Ben in this deck with respect to Q3 numbers. Obviously we are legally required to share our 20-F. So, that's going to be the first time we will give a full-blown financial statement. So, this goes for the first part of your question. And for the second part is, we are -- for the second part you asked about the targets we put for 2022 and till 2025, so we are we are really focused on ramping up all aspects of the company’s business, building the right products, diversifying our already rich data offering, expanding our team and their talents, and of course boosting our traction both direct and indirect sales channels. These efforts are already reaping results with increased number of significant POCs with enterprises like LeasePlan, Ben mentioned, market leader channel partner like Salesforce and AWS. And we do anticipate these silos will turn into significant paying customers going forward. In addition now we continue to explore opportunities for non-organic growth. And we think that all these points are in line with our plan to scale up our revenues. Having said that, we are now giving our targets for 2022, considering the delays or slower movements in the ecosystem we encountered in 2021 as was discussed earlier by Ben.

Operator: Thank you. There are no further questions. I would like to hand the call to Ben Volkow, Otonomo's CEO for closing remarks. Please go ahead.

Ben Volkow : Thank you all for joining today. We're looking forward to seeing you on the next earning call. Thank you very much.

Operator: That does conclude teleconference for today. Thank you for participating. You may all disconnect. Have a nice day.