BeWhere Holdings CEO Owen Moore Podcast Interview (2)
Listen to the podcast interview with Owen Moore: http://www.midasletter.com/2016/02/bewhere-holdings-ceo-owen-moore-podcast-interview/
James West: Owen, thanks for joining us today.
Owen Moore: Thanks for having me on, James.
James West: Hey, Owen, you guys have recently gone public on the TSX Venture Exchange. Why don’t you remind us the overview of the value proposition for investors in BeWhere?
Owen Moore: Sure. So the overall value proposition for investors, I believe, has to do with the market, the size of the market that we’re targeting. We’re targeting a couple of different verticals, but the one with the largest strength, I believe, is transportation, and it includes putting low-energy Bluetooth beacons, which we design and manufacture, at the pallet level. The reason I say it’s a large market opportunity is because there’s about 1.3 billion pallets in the US alone. It’s a market that’s growing, and it’s being converted over from wood pallets to specialty pallets that are made of plastic, and therein lies the opportunity for potential and existing investors.
James West: Hmm. So you’re going to put your beacon devices into these new pallets, and what is the attraction to that for people who use the pallets?
Owen Moore: Sure, so we monitor the goods that are being carried on the pallets, for location, exposure to potential damage, including impact, temperature and in some cases, light exposure. But it also provides them with the ability to manage their pallets. So if you can imagine a large distributor of manufacturer of products, where they have pallets spread out across their manufacturing sites, their distribution centres and at the point of sale, a plastic pallets tend to be a little bit more expensive. So it’s sort of a twofold proposition for the clients: it allows them to manage their pallet inventory and understand where they are, so they have pallets available to do the job that they have to do, but then it also gives them the ability to manage their goods in transit and understand any potential choke points, understand different locations where they may be susceptible to damage, the goods that is, and provides all that information live and in real time for them.
James West: Okay. So who is using your product right now?
Owen Moore: So we sell the product through distributors. We have set up already a fairly significant distribution channel; it includes a large carrier here in Canada, it includes a number of the larger vehicle tracking companies that integrate our solution into their vehicle tracking product, and we recently announced our newest distribution and technology partner, a company by the name of I-Soft which is an interesting company that is developing some technology providing alarming and alerting for their existing client base, and they have a fairly broad client base today that they’re going to be targeting new products with.
So we have clients in the emergency medical services industry tracking defibrillators, stretchers, medbags, equipment bags; we have clients in the transportation industry using them for monitoring pallets as we discussed, and then we’re also targeting utilities and construction companies from monitoring heavy equipment and non-powered equipment such as generators, tools, equipment that might be at a construction site.
James West: Okay. So can you discuss any, say, Fortune 500 end-users by name at this point?
Owen Moore: So because we sell it through our distribution partners, I can discuss our distribution partners; I’m sort of not at liberty to discuss who their end-users are.
James West: But there are Fortune 500 end-users among them, potentially?
Owen Moore: Yes, and government as well. I don’t know if they fall into the Fortune 500 banner, but, you know, significant clients.
James West: Okay. So what’s the revenue ramp going to look like on this thing? When do you anticipate achieving profitability?
Owen Moore: Okay, so what we have under our disclosure documents today, and this is in conjunction with the offering and taking the company public, we provided the numbers up until the end of September 2015, so that was a nine-month period up until the end of September. We commercialized the product around the end of July, beginning of August; the first two months out of the gate, we produced a little over $100,000 in revenue. We are expecting that to ramp going into 2016, and revenues on the order of about 1.2 million to 1.5 million for 2016, and then growing into 2017.
James West: Okay. So tell me a bit about the financial condition of the company: how much money do you have on hand, how soon till you need to go back to the market, and how much more money is it going to take from the market to achieve profitability?
Owen Moore: Okay, so we just closed financing for a little over 2 million; it was oversubscribed, which we were quite happy with given the state of the market today. That should get us to profitability. We are forecasting profitability by the end of 2016. If we land something extremely significant, then we’re obviously going to reserve the right to come back to the market to top up our cash, but that would be in conjunction with signing a big contract.
James West: Okay, interesting. What are the major competitors out there? Who’s in the marketplace, and how much bigger than you are they?
Owen Moore: Sure. So this is relatively new technology. This is a technology that was traditionally the realm of RFID/vehicle telematics, so it’s a combination of those two technologies that we’re bringing a product to market that will allow end users to not just monitor their goods where RFID traditionally held ground, in a warehouse or in a facility, but also extend that to monitoring the goods as it’s being transported from a distribution centre to a point of sale, or from a manufacturing centre to a distribution centre. So it’s a relatively new industry. There are a couple players that we’ve seen come into the market relatively recently, one that’s fairly well known on Bay Street and includes a company called Axios, who are actually a pallet manufacturer but they’re implementing some RFID technology into their solution.
And then a couple, well, one other one out of Israel that we’ve come across, their name escapes me right now, and recently we’ve seen another one come out of California, which is using low energy Bluetooth.
So it is new technology, it’s not RFID technology, and we think it has the potential to disrupt what was traditionally an RFID technology solution.
James West: Okay. And you have experience building vehicle telematics technologies in the past; you sold a company within the recent past, did you not?
Owen Moore: I did. I was a co-founder and president of a company called Grey Island, which went public through a reverse takeover of a mining company, so a very similar process. That was in 2002. We grew it from inception to about 24 million in revenues and then sold out for just under 40 million to another vehicle telematics company that was publicly traded. So a fair bit of experience doing the vehicle tracking, and some of my former competitors today are technology partners of ours. So there’s a number of large players out there that are established in the vehicle tracking space, including companies like Geotab, Fleet Freedom, a few others that I’m not at liberty to disclose, that are existing partners of BeWhere’s today, and that is another channel that we use to take our beacons to market.
James West: So do you anticipate BeWhere becoming a takeout target for one of these larger entities once you’ve established and proven the technology?
Owen Moore: I think it’s a little premature to start talking about getting taken out. We’re listing tomorrow, the company’s about 14 or 15 months old. But our primary focus today is to grow revenues, to create shareholder value, and then whatever the ultimate exit strategy is, we’ll figure out that in the years to come.
James West: Sure. How much of the company do you and your fellow founders and insiders control?
Owen Moore: So insiders and founders, you’re probably looking between about 55 to 60 percent, including management and directors.
James West: Okay. Can you tell me a bit about, what’s the total paid in capital, and how many shares are out, how many options, how many warrants?
Owen Moore: Okay, so there are approximately 37, 38 million shares outstanding. That includes the financing, which was just completed at $0.15 a unit for a little over $2 million worth, and it included – it was a unit financing which included a half-warrant.
James West: So how global is this technology and what is the total market size potentially, if you were to become a global success story?
Owen Moore: Okay. So first on the technology side, there’s nothing stopping us from rolling out on a worldwide basis. We don’t need to certify our Bluetooth product with every cellular carrier to break into a new market; our devices communicate through existing cell phones that will reside in a given market. So today, we’ve rolled out product in Brazil, Colombia, Mexico, Saudi Arabia, Croatia, and a number of other markets around the world.
I talked a little bit about the market for pallets, just in North America or specifically to the US, and that’s a fraction of the market. So we do see some strong opportunities for the solution on a worldwide basis, with nothing technically preventing us from rolling out, and like I said, have already rolled out distribution in a number of countries around the world.
The market opportunity, and this is relative to my background, where you were ultimately limited to the number of commercial vehicles on the road, it’s orders of magnitude larger. For every vehicle, you can have dozens of goods or tools being transported in those vehicles, and then have a market opportunity orders of magnitude larger than what the number of vehicles are, on a worldwide basis. So we’re – that’s one of the things that excites us the most about this particular product and this company, is that the size of the market is just absolutely mammoth.
James West: Okay. Walk me through your revenue model. So I assume you sell the actual devices, and is there a recurring revenue stream in there anywhere?
Owen Moore: There is. So the revenue model includes both an upfront fee for the hardware, and actually, we tend to bake an upfront fee in for the service as well and then just recognize that monthly over the initial term of a contract, which is typically two years. So clients will pay a one-time fee for the hardware, which will bake in a monthly fee that gets recognized over the term of the service.
James West: But they pre-pay it?
Owen Moore: They pre-pay it, and you know, in our financial statements, you’ll see a deferred revenue component that would account for that recurring revenue component that we realized on a monthly basis over the first two year.
James West: Sure, okay. So we live in an era of rapidly evolving technologies, and so your technology is new. How likely is it that yet a newer technology might come along that’s better, faster, cheaper, running on a different platform, that might displace your technology? How realistic do you see that scenario?
Owen Moore: I do think that technology evolves constantly, and I do think – well, we’re currently today working on a next generation product already. I don’t necessarily know if it’ll be cheaper, but it could provide additional functionality. So cellular networks are networks that provide broad coverage and are focused on the IOT world, and I do think over the next six, nine, twelve months, you’ll see our company generating new product. Now once again, the price points to market, when you have to incur a cellular fee, changes the entire structure of the price point to end users, but it adds different levels of functionality. So today, the solution, well, we sell it as a loss prevention solution; we don’t sell it as an anti-theft solution, and clients may tend to be willing to pay a little bit more for an anti-theft solution. The caveat is that you need constant communication whether it’s within or without of range f a device that’s collecting the information. We expect to be at the forefront of that technology too, as it continues to evolve going forward.
James West: All right, Owen, let’s leave it there for now. Thank you for joining us today.
Owen Moore: Thanks for having me on, James.