Release Date: September 26, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Fadel Partners Inc (LSE:FADL, Financial) has successfully launched its LicenSee offering, winning three new customers and building a strong pipeline of deals.
- The company has seen a 33% growth in ARR for its Brand Vision product, with no logo churn during the first half of 2024.
- Services revenue increased by 90% to $1.9 million, driven by new IPM implementations and regional expansions.
- Gross margin for the first half of 2024 increased to 53% from 50%, with services margin significantly up to 61%.
- Fadel Partners Inc (LSE:FADL) has strategically enhanced its sales and marketing teams, leading to improved pipeline management and client wins.
Negative Points
- Total revenue for the first half of 2024 decreased by 2% to $5.3 million compared to the same period in 2023.
- License subscription and support revenue dropped from $4.3 million to $3.4 million, mainly due to customers transitioning to self-hosted environments.
- PictureDesk ARR decreased by 31%, with a significant customer churn impacting the overall ARR.
- Cash on hand decreased from $3.2 million at the end of 2023 to $2.2 million by mid-2024.
- The pricing environment in 2024 has been softer, with companies looking to maximize their spend, leading to some delays in decision-making.
Q & A Highlights
Q: How are you positioning the business to diversify revenues and manage revenue concentration?
A: (Tarek Fadel, CEO) We are diversifying through our two main product lines: IP Management Suite and Brand Vision. These products target different buyers in various industries, such as finance teams for IP Management and marketers for Brand Vision. Additionally, we are expanding geographically, focusing on North America and Western Europe.
Q: When considering the expansion of your pipeline, which sectors are showing the most promise and how are you tailoring your offerings to meet these specific needs?
A: (Tarek Fadel, CEO) For IP Management, consumer products licensing and educational publishing are key sectors. On the Brand Vision side, global brands in sectors like CPG, FMCG, beauty, fashion, travel, retail, and automotive are showing strong demand.
Q: Are there any plans to scale up sales through strategic partners rather than your own sales force?
A: (Tarek Fadel, CEO) Yes, we are looking to create strategic partnerships for both our LicenSee and Brand Vision platforms. We already have partnerships with large digital asset management vendors and are exploring partnerships with media agencies.
Q: For Fadel to be more attractive for investors and suitors, we need to move closer to the Rule of 40 (revenue growth rate plus profit margin greater than 40%). How far are we?
A: (Tarek Fadel, CEO) We are focusing on achieving double-digit ARR growth and profitability. Our ARR growth is already in double digits year-over-year, and we aim to reach the Rule of 40 over the next few years.
Q: How is the pricing environment and how has it impacted the ARR rate?
A: (Tarek Fadel, CEO) The pricing environment in 2024 has been softer, with companies maximizing their spend. However, we are seeing a stronger pipeline and expect a positive impact on ARR in the second half of the year.
Q: What progress have you made with your LicenSee offering?
A: (Tarek Fadel, CEO) We have successfully launched the LicenSee offering, won three new customers, and built a strong pipeline of deals expected to close in Q4 and 2025. The addressable market is substantial, with thousands of mid-market and small licensees.
Q: How are you leveraging AI in your Brand Vision offerings?
A: (Tarek Fadel, CEO) We are increasing our AI-based matching technologies, which attract customers within our install base. We plan to release audio matching capabilities in Q4 to help brands stay compliant with music licenses.
Q: What measures have you taken to ensure business continuity given the situation in the Middle East?
A: (Tarek Fadel, CEO) We have ensured our team's safety and operational continuity by setting up secondary resources in Jordan and additional office space in northern Lebanon. We are fully operational and continue to execute our plans.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
