Wejo Group Limited (NASDAQ:WEJO) Q4 2021 Earnings Conference Call March 31, 2022 5:00 PM ET
Company Participants
Tahmin Clarke – Senior Vice President, Investor Relations
Richard Barlow – Founder and Chief Executive Officer
John Maxwell – Chief Financial Officer
Conference Call Participants
Jeff Meuler – Baird
Sam Brandeis – Wedbush Securities
Operator
Greetings and welcome to Wejo’s Fourth Quarter and Year End 2021 Business Update Webcast. At this time, all participants are in a listen-only mode. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Mr. Tahmin Clarke, Senior Vice President of Investor Relations for Wejo.
Tahmin Clarke
Thank you, Megan. Good morning, everyone and thank you for joining Wejo’s business update call to discuss our fourth quarter and full year 2021 operational and financial results. With me on the call today are Richard Barlow, our Founder and CEO and John Maxwell, our CFO.
Remarks made today on this call about future expectations, events, strategies, objectives, trends or projected financial results and other similar items are forward-looking. Forward-looking statements are subject to the Safe Harbor provisions of the Private Securities Litigation Reform Act of 1995. Forward-looking statements are not guarantees of future performance and as such should be taken in the context of the risks and uncertainties that are outlined in SEC filings of Wejo, including our recently filed annual report on Form 10-K as well as other documents filed with the SEC. Forward-looking statements speak only as of the date made and the company undertakes no obligation to update such statements in the future.
In addition, during this call, we will be discussing certain financial metrics that do not conform to generally accepted accounting principles in the U.S. better known as GAAP. For a reconciliation of these financial metrics to GAAP, please refer to our annual report on Form 10-K filed with the SEC.
And now, I will turn the call over to Richard.
Richard Barlow
Welcome to Wejo’s 2021 fourth and year end business update. We are extremely excited about the progress that we have made as a company since our public listing in November last year. This progress has seen us sign our first major software and cloud solutions deal with a large North American OEM to setup a manager’s privacy data quality processes. This deal is currently focused on privacy, but we expect to extend our services to include additional data management and analytics solutions which offer the OEM a wide range of beneficial services to their customers. We have also launched an innovative EV infrastructure operating system that embraces Palantir’s foundry platform to help governments and utilities help optimize site selection for charging points.
We also announced our groundbreaking Wejo Neural Edge Processing platform powered by Microsoft that will allow processing of data closer to the vehicle. As at the end of 2021, there are 16.1 million vehicles on platform which we can hold data that can be monetized and there are 11.8 million active vehicles currently live on platform which we are streaming data in near real time. These vehicles generated $0.75 of gross bookings perfect in 2021, a 69% increase over the prior year. Our recently announced committed equity financing up to $100 million allows us to continue making key investments, deploy new products, bring on more data sources, and expand to key geographies across Europe and the Asia-Pacific region. These deals and product announcements are just the tip of the iceberg when it comes to what is happening here at Wejo. With many more opportunities on the horizon to innovate, deploy new products and services and develop stronger customer relationships, Wejo is full steam ahead. That is why we are confident our long-term strategic plan that we shared last year.
Our serviceable addressable market of $60 billion has grown even further with the solutions that we have developed. Our market positioning is also strengthening as we continue to expand our offerings in Wejo data marketplace and Wejo cloud and software solutions. We expect all these efforts will help maintain our position as the market leader in the ever growing connected electric and autonomous vehicle data in smart mobility sector. Our areas of emphasis for 2022 include remote diagnostics, audience and media management, end-to-end insurance, roadside assistance and fleet management.
In addition to these product lines, we are also focused on targeting new enterprise customers and expanding relationships. The path connected electric and autonomous vehicle data has meant that many of our existing enterprise customers have begun to use the insights that we can deliver across more areas of our business. This will accelerate to expand across new product lines the expansion will help us and bring your newest price customers and will result in generating high gross bookings per vehicle.
Our other financial measures and key performance indicators of 2021 versus 2020 are net revenue of 92%, gross bookings up at 105%, annual recurring revenue up 73%, total contract value up 68%, and vehicles on platform, up 29%. All these KPIs will enable Wejo to grow revenues significantly over 2021 levels, improve our margins and continue to gain share amongst which we operate. This focus on revenue leads us to describing our financial results.
And I will now hand you over to Wejo’s Chief Financial Officer, John Maxwell.
John Maxwell
Okay. Thank you, Richard. We reported strong financial performance for both the fourth quarter and full year of 2021. Net revenue for the year was $2.6 million, representing a 92% increase when compared to the prior year. Most of this performance reflects strong year-over-year in traffic management. Net revenue for the fourth quarter was $1.4 million up over the same period last year, reflecting robust performance in the marketplace and initial revenue from the launch of Wejo’s software and cloud solutions in the fourth quarter. Underlying the company’s revenue performance was new customer activity that helps build our revenue base as we enter ‘22.
In addition to net revenue, as is reported in our operating results, we believe there are additional reportable metrics to add clarity for the investor. Our customer activity in our markets is driving revenue in the short-term and helping us progress towards our long-term revenue goals. Historically, we have shared gross sales to reflect revenue from customers before the revenue share to our OEM partners. We took a hard look at our metrics as we prepared for this update call with the goal of providing our investors the most meaningful metrics beyond our reported results.
Our key performance indicators for 2021 versus ‘20 are net revenue is up 92%. Our adjusted EBITDA loss was $67.7 million. Gross bookings are up 105%. Annual recurring revenue is up 73%. Total contract value is up 68%. And vehicles on platform are higher by 29%. Total contract value which we define as the estimated value of all contracts the company has signed to-date with its customers grew by 68% since the end of 2020 to $20 million. Gross bookings, which in practical terms is new business, but specifically defined as the total projected value of contracts signed in the current period, increased 105% in 2021 to $8.4 million and 248% in the fourth quarter to over $3.1 million. The acceleration in the growth rate of new customer bookings reflects continued expansion in our first product traffic management, but also the early expansion that we are seeing in the launch of our software and cloud solution capabilities in the automotive industry.
As our customer relationships evolve more heavily to software and subscription-based solutions, we will see an increasing trend of contract bookings that will be recognized over the life of the customer relationship. This also will help Wejo expand its gross margins to become positive in 2022 and continue to improve in future years. As Wejo heads into 2022, we are excited about the evolution of our business. Prior to our current offering, Wejo has been primarily a data licensing business in our first product line traffic management. Our customers would purchase live streams or batches of Wejo data and interpret that data to get the relevant analytics. Some customers are repeat purchasers others would purchase a single batch of data. Fast forward to today, we have Wejo Marketplace Data Solutions, which also includes Wejo Studio visualization tools that can be utilized across multiple product lines and in numerous customer markets.
Wejo is rapidly developing tools and applications which run the gamut from visualization and data analytics tools to privacy solutions, data management and even platform licensing. The automotive SaaS deal that we signed late last year is focused on privacy management and data cleansing services for a major OEMs data. The initial contract was for Wejo to tailor our solutions to the customer’s needs and set the customer up for use of our software solutions on a multi-year basis. We are expecting to sign a multi-year data management relationship with this customer by mid-2022. This relationship reflects the first of its kind with this major OEM customer, but also reflects the beginning of the types of data management and platform solutions that we expect to provide across the automotive industry starting in 2022 and beyond. We believe the opportunity in this arena is substantial and Wejo is well-positioned to support our automotive industry’s data management needs.
From a revenue standpoint, we expect to continue to see accelerated gross bookings performance adding to our total contract value and backlog, which supports a stronger base off which to build a future revenue performance. The next significant evolution in our business is in the Wejo Marketplace Data Solutions. As we have mentioned, our marketplace revenues have been primarily driven by the traffic management solutions offerings. Traffic grew by 50% in 2021 and we believe our growth rate in the marketplace will accelerate as we add visualization and software tools to Wejo Studio and launch new product lines. Traffic management is just the beginning of our product capabilities and was an excellent product line to start the commercial launch of marketplace. In 2022, we expect to develop and launch 5 new product lines. By the end of 2022, we expect to have new customers and remote diagnostics, end-to-end insurance, audience and media measurement, roadside assistance and fleet management services.
We have already started our work in end-to-end insurance partnering with Sompo to build a digital insurance platform for the Japanese market. We also are partnering with Hella on remote diagnostics to create dynamic solutions for this product line. As an example, our dealer intelligence solutions will leverage these capabilities in the future. Entering these additional markets is expected to have only a moderate impact on 2022 revenue, but we expect will position the company for substantial growth in the marketplace business line beyond 2022.
We have highlighted each product line, the stage of development, the target audience and the expected launch date in our Form 10-K. As Wejo builds from its initial commercial launch, our customer relationships are migrating from pure data licensing deals to SaaS solutions developed in our software and cloud business as expected. The fundamental relationship will evolve from a transactional revenue recognition to recognition over a period of time based on the subscription or software license relationship. As a result, we expect to see increasing levels of annual recurring revenue as well as longer term deals, with revenue being recognized over multiple periods. As of the end of 2021, there are 16.1 million vehicles on platform from which we hold data that can be monetized. And there are 11.8 million active vehicles currently live on platform from which we are streaming data in near real-time. These vehicles and their connection to ADEPT are important as their data underlie our products, insights and solutions.
Gross bookings per active vehicle on platform, was up 69% from $0.44 to $0.75. This metric will continue to grow as we have product lines, large enterprise customer relationships that get expanded over time and various software solutions within our product lines and is a good measure of the economics we can generate per vehicle on platform. For 2021, we e incurred an adjusted EBITDA loss of $67.7 million as compared to $25.2 million loss in the year 2020. As a reminder, our adjusted EBITDA takes the standard EBITDA definition working from operating loss and also excludes non-cash stock compensation and transaction-related expenses. And we use this non-GAAP measure to help our investors understand operating performance before the significant effect of our listing transaction as well as non-cash expenses. We believe adjusted EBITDA loss is a rough proxy for cash flow, with some adjustments for timing and financing costs.
For 2022, we expect our adjusted EBITDA loss to be $110 million to $120 million, which is greater than 2021, because we are accelerating our spending on development and deployment of tools and applications to support our expansion into newer product lines, sales presence and new OEM vehicle onboarding. While we are not guiding to a specific gross margin, we expect the gross margin will turn positive in 2022 as the company scales revenue using our unique data platform. Including cash on hand and assuming that we are able to fully draw both the Apollo forward purchase agreement for $72.5 million and the committed equity facility for $100 million, Wejo has enough liquidity to support the business until the end of 2023 subject to the timing of operating expenses and the timing of revenue from our customers.
At this time, the company does not have specific plans to raise additional capital and will evaluate the timing of any additional capital raises around our needs as a business and opportunities in the capital markets. As we have previously discussed, M&A in the near term will be targeted to accelerate our position in our marketplace product lines, accelerating revenue growth and profitability earlier than would have been seen on a purely organic basis. We will of course update when and if we are able to complete any M&A transactions.
To complete our guidance picture for 2022 for net revenue, we are starting with a base of revenue that we have a reasonable line of sight to achieve based on our existing annual recurring revenue on products launched to-date and our pipeline visibility. At the base level, we expect to generate net revenue of $10 million, which would represent a 285% increase over what we reported in 2021. We are pursuing a robust pipeline in software and cloud solutions that we believe will have a substantial impact on our gross bookings and total contract value in ‘22, but the timing of revenue recognition cannot be fully determined until the final strokes of each customer deal are put into place.
Additionally, it is likely that a number of these deals will be multi-year arrangements under which revenue will span a longer time horizon than the current reporting period. While these are very robust opportunities for Wejo’s performance in the connected vehicle data marketplace, it also means that the exact timing of revenue recognition and therefore revenue guidance is harder to pin down. As Wejo grows to scale, we expect that our revenue base will grow significantly and we will also have greater predictability in our near-term revenue performance. We are in the process of launching new software visualization tools in Wejo Studio and plan to deploy these tools over multiple new product lines. We believe that the most significant impact of these new product line launches will be felt in 2023 and beyond although some portion of the marketplace growth in 2022 also will come from these areas. These marketplace efforts will drive annual recurring revenue to be a higher percentage of our revenue base in the future. We expect to end 2022 with a range of 27 million to 32 million vehicles on our platform. As our gross bookings per vehicle and platform continues to grow, it will drive substantial growth in our net revenues. Thanks for listening. Back to you, Richard.
Richard Barlow
The world is facing some enormous challenges. The macroeconomic environment, rising energy prices, semiconductor shortages and supply chain issues for European OEMs. Wejo is developing commercial solutions right now to help address some of these challenging global issues. How can we get around more efficiently? How can we spend less on fuel than other energy costs? How can we more effectively deliver goods and services? How can we transition quick into more sustainable modes of transport? How can cities be smarter, greener and less congested? Public and private organizations will need to make significant global investments to successfully address these questions. Wejo is in a prime position to benefit from these investments because of its continued innovation in the smart mobility space like the EV infrastructure operating system with Palantir or Wejo Neural Edge with Microsoft.
Our mission to develop products and services that deliver seamless mobility experiences to wide range of customers is why our employees across the world are fully engaged and starting to accomplish this goal. To support the demand from our customers who have requested critical solutions to support their business needs, we are expanding on data relationships globally. This is where the focus of accessing datasets with wider and richer access to sensors that enables further expansion of insights analytics that Wejo can provide to its customers. Wejo has collected vehicle data on our platform from over 16 million vehicles. We expect to nearly double that level in 2022 as we continue to further expand these relationships. This broader dataset allows us to rollout more new product lines in 2022 and to expand geographically as we gain access to a critical mass of relevant data in the regions. Our business continues to scale, but I will focus on delivering on our goals of revenue and adjusted EBITDA margin and our long-term forecast remain the same.
As John outlined, we revised our reportable KPIs to help our investors better understand the direction of our business. A couple of notable changes in how Wejo will discuss this forecast in future include, we now track gross bookings instead of gross sales. And this focuses on our new business being signed which drives our revenue performance. In 2021, gross bookings were $8.4 million, which were just shy of a $9.8 million 2021 target, but very much on track in terms of long-term direction of the business. Ultimately, the deal activity will be a key driver and we are focusing increasingly on larger sized deals. Using gross bookings as a base, we now calculate our unit economics using gross bookings again to reflect the sales performance of the business and the economics being driven of each vehicle live on our platform. Both these changes reflected desire to demonstrate the strong progress of our business without using proxies for revenue.
We are determined to provide our investors a transparent view of how we are executing in our business. We have continued to focus on products, tools and solutions that would generate growing recurring revenue from subscriptions and product licensing and are upfront with our key performance indicators of 2021 versus 2020, which are net revenue being up 92%, gross bookings up 105%, annual recurring revenue up 73%, and total contract value up 68%, and vehicles on platform up 29%. Tracking these metrics will give you insights into how Wejo is performing in the market and progressing its goals of 2022 and beyond.
As we come to the close of this business update, I wanted to leave you with a few points with our customers and use cases of our solutions will give you the confidence that Wejo is the global leader in cloud and software solutions from connected, electric and autonomous vehicles. To name a few examples on new customers that we continue to add each day, traffic tech services are using connected vehicle data to understand and improve signal timings and Zuber [ph] is an analytics company based in Europe that uses Wejo’s cloud data to make roads safer. Oklahoma State University is enabling Department of Transport to better understand road congestions so they can more cost effectively prioritize infrastructure projects that will reduce crashes and fatalities. Geothermal ITS [ph] manages congestion analysis and signal timing.
And finally, Flow Labs provides transportation agencies with more efficient ways to make roads safer and reduce traffic through end-to-end traffic signal management. The process to monitor and update traffic signal timing is typically very manual and expensive often requiring up to 70 hours of expert labor per intersection and installation of costly hardware sensors. For this reason, traffic signals are updated once every 5 years. That is why Wejo is disrupting traffic management globally with our unique electric and connected vehicle dataset. These customers are focused in traffic management and our illustration is that in many ways that Wejo’s platform can benefit our customers and society across multiple verticals.
I’d like to thank you for taking the time to join this earnings call. We will now take any questions you may have.
Question-and-Answer Session
Operator
Thank you. [Operator Instructions] Our first question comes from Jeff Meuler with Baird. Please state your question.
Jeff Meuler
Yes, thank you. Maybe just looking, I guess for some more clarity on where you stand with Neural Edge. I think the January announcement said it was something you would be developing and future details would come at a later date. And it sounds today like maybe its launch. So, just any sense of just how if it’s live or how close it is to being live and the more substantive question behind it? Just talk about the impact it will have on vehicle-to-vehicle or vehicle to infrastructure communications for Wejo?
Richard Barlow
Hi, Jeff. I will say that. Wejo is the only company in terms of the broader competitive landscape that has real-time data relationships with OEMs, where we take real-time data from as you heard on the call now 16 million vehicles and 12 million being live at any one point or just under 12 million. And part of our focus is to reduce the latency, the benefit reducing latencies that we can then broader our product offering to go from we started by being in the connected vehicle space, we now went on to EV, where we have launched an operating system to provide real time information back to utilities companies with our partnership with Palantir. And now we are also going to AV space, autonomous vehicle, we are having super low latent, super fast networks is a key part of our initiative. So Neural Edge is developing well internally as a product. We are getting some interesting feedback commercially from OEMs, how they want to use that product. But primarily, Neural Edge is built to service the demands in the broader data offering of being both a connected vehicle, but also an electric vehicle and autonomous vehicle data provider.
Jeff Meuler
Okay, got it. And then it looks like you are on track to get to around 30 million vehicles on platform by the end of the year. You have given us some logos in the past. I was just – do you have if we would look at the number of connected vehicles sold in the United States in 2021. Do you have a metric like what percentage of those sales are coming from OEMs that you have signed data rights partnerships with already or any sort of metric like that?
Richard Barlow
Yes. I think we should present to you. It’s very difficult to get live data from OEMs to the number of vehicles that are connected. We know the number of vehicles that can be connected, but it’s a different metric. The ones that have been connected, it depends on the consents. It depends on the up-sell the OEMs done to the consumer. What we do, what we do remind you all is as we have preferred partner agreements in place with number of OEMs in the U.S. and broader, including Japan and other parts of APAC, including Europe, where those OEMs in defined marketplaces cannot work with, but with other platforms. So, if the OEM has a connected vehicle available, then in the defined market that could only be presented to Wejo. So in terms of live vehicles, we have not seen any other vendor claiming 60 million vehicles have been presented live vehicle on platform and in terms of – with a broad array of data where we now get up to 220 sensors in vehicle. But it’s a good metric, which we should consider that in terms of transparency to show how we are – how we maintain our market leading position.
Jeff Meuler
Okay. And then just last one for me, I guess this is for you – probably for you, John, but just help us understand the guidance methodology a little bit better not sure of what exactly you are saying here. But I think you say that you include new business in the pipeline that’s in the late stages of closing, but you don’t include new customer opportunities that are in the pipeline that are in the late stages of closing. So if you can just help us better understand what exactly is not in the guidance?
John Maxwell
Yes, sure. Absolutely. So, we do include obviously contracted revenue and then late stage pipeline. And we have some level of visibility as well into continued growth in traffic. And obviously, we do include that that part of the business as well. We have several new products that are launching in the marketplace and we have not included the revenue in the base guidance, but we do expect some revenue ultimately to come from that. And then we have a pretty significant pipeline of automotive OEM type contract opportunities that we believe will be multiyear type arrangements like the one we signed in the fourth quarter of last year, where again until we can get through the final stages of the relationship building the contract negotiation, we won’t know the exact timing of revenue, we expect bookings to be very significant from those types of contracts. So, we will build a really good book of business and we do expect revenue from it, but we can’t yet predict what it will be. So, what I would tell you is that base is what we see as our – as a good solid base of which we are building and then we will update the market as the year progresses and we continue to add new business.
Jeff Meuler
Got it. Thank you.
Operator
Thank you. Our next question comes from Sam Brandeis with Wedbush Securities. Please go ahead.
Sam Brandeis
Hi, guys. Sam on for Dan Ives. So, can you guys talk about how conversations with OEMs have changed today, let’s say versus past 12 – the past 6 to 12 months? And kind of going off of that, how do you see like the deal landscape playing out with those said OEMs over the next year? Thank you.
Richard Barlow
So, you will have had from our earnings presentation that we secured our first substantial OEM agreement where we are running the global data privacy for that particular area. So, in terms of the deal landscape we are seeing inbound demand growing familiar more broadly than just marketplace. When you recall our service addressable market where we estimate is the SAM for marketplace is about $30 billion and cloud and software solutions is a further $30 billion. We are happy with that SAM. We see that SAM growing both sides and the inbound demand we are getting from OEMs is that they want a broad array of services from us. Because we have shown our technology works, we have shown our technology is processing huge volumes of data. We have shown we can be trusted with data. And we are showing now really interesting compelling insights, real-time insights from the data assets, which is also validated from our growing enterprise clients, including the likes of Microsoft who are using us in their mapping products.
Sam Brandeis
Great. Thank you.
Operator
Thank you. And ladies and gentlemen, there appears to be no additional questions at this time. I’ll turn the floor back to management for closing remarks. Thank you.
Richard Barlow
I wanted to thank you all for joining us this earnings call today. As you have seen from our presentation, we are very much focused on the KPIs for our business, whether it’s live vehicles on platform, whether it’s gross bookings, whether it’s gross bookings per vehicle, whether it’s total contract value, that is a cadence we have now set and we will be presenting to you on a regular basis. And you can form a view as to how well we are scaling this organization. Thanks for your time. John, do you want to add any closing comments? You are muted John.
John Maxwell
I am sorry. No, no, look, I mean we are very excited about where we are. We are excited about 2022. We are off to a great start and look forward to continuing the dialogue with investors as we progress.
Operator
Thank you. And with that, we conclude today’s webcast. Have a good evening. Thank you.
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