Pinewood Technologies Group H2 2024 Earnings Call Transcript

Quartr
Provided by Quartr
April 1, 2025

Key Takeaways

  • Positive Sentiment: Pinewood delivered FY 2024 revenue growth of 15.1% and gross profit up 16.5%, with a gross margin of 90.4% and underlying profit before tax of £8.5 million, ahead of analyst expectations.
  • Positive Sentiment: Signed major UK auto retailers Marshalls and Lookers, including a five-year contract with Marshalls to deploy its full product suite, reinforcing market leadership in the UK.
  • Positive Sentiment: Completed acquisition of SEAS, a leading automotive AI platform, funded by an oversubscribed equity raise, to accelerate AI-driven features and cross-sell opportunities.
  • Neutral Sentiment: Stays on track for a North America pilot in 2025 and full rollout in 2026, backed by a £10 million JV investment with Lithia and ongoing discussions to reshape JV terms.
  • Positive Sentiment: Raised medium-term targets with FY 2027 underlying EBITDA now expected in the mid-to-high £30 million range and FY 2025 PBT in line with market forecasts, reflecting confidence in growth pipeline.
AI Generated. May Contain Errors.
Earnings Conference Call
Pinewood Technologies Group H2 2024
00:00 / 00:00

There are 7 speakers on the call.

Operator

Good morning, everyone, and welcome to our FY 'twenty '4 Results Presentation. I'm Bill Berman, CEO, and I'm joined today by our CFO, Ollie Mann. I'm delighted to announce a set of results ahead of analysts' expectations, and then Oli will take us through the headline financials shortly. But first, I'm going to reflect on what's been a landmark year for Pinewood. After the successful conclusion of the transaction with Lithia, we have worked hard to ensure the company's transformation into a stand alone software business is off to a really good start.

Operator

Our main area of focus at the beginning of the year was to make sure we had strong foundations in place to support ambitious growth targets. This involved getting our resource levels to ensure we are the strongest position possible to execute against our strategy. This early preparatory work was so successful that we are already beginning to see it bear fruit, with early success delivering on key strategic goals set out at our Capital Markets Day in October. Let me take you through some of the highlights. We have signed up two of the largest auto retailers in The UK in Marshalls and Lookers, which is a testament to the strength of the Pinewood platform.

Operator

We are very excited about working with both these groups and look forward to help them grow their businesses, make them more efficient, more productive and ultimately save them cost. Next, the acquisition of SEAS, a leading automotive AI platform, in February 2025 is one of the most exciting developments in Pinewood's history. We have a unique opportunity to use the power of their AI technology to grow seeds as a stand alone business and increase cross sell and upsell opportunities for the legacy Pinewood business. The oversubscribed equity raise to fund the cash component of the deal shows that our investors share our optimism for the deal's potential to boost our prospects in the coming years. We are also very good progress in expanding our international business and have an exciting pipeline of opportunities.

Operator

Finally, we have made excellent progress on our North American rollout. We are on course to pilot our system in North America in the 2025 before commencing full rollout later in 2026. I'll now hand over to Oli to take us through the financial review.

Speaker 1

Thanks, Bill. Good morning, everyone. Before I take you through the financial highlights, just a quick reminder on the period this set of results covers. With FY 2023 being a thirteen month period ending at the January 2024, due to the timing of the Lithia deal completing, we are now moving back to December year end. So FY 2024 covers the eleven month period ending December 2024.

Speaker 1

As a result, FY 2024 and FY 2023 can't be compared on a like for like basis, so we have presented the eleven months ending December 2023 as a comparative. As Bill said, we've got off to a very strong start as a stand alone software business, and our financial performance reflects that. On a like for like basis, revenue has grown by 15.1% and gross profit has grown by 16.5%. This means that gross margin increased from 89.3% to 90.4%. One of the main drivers for our strong revenue growth has been a highly successful system rollout into the remaining Lithia UK stores that finished in December 2024.

Speaker 1

Our high recurring revenue of 86.5% is in the 85% to 90% range that we typically expect our recurring revenue to be in. The majority of our nonrecurring revenue is training and implementation income from rolling the system out. The vast majority of our cost of sales are Azure hosting costs. We improved gross margins by implementing a number of cost saving initiatives on our hosting setup while still optimizing system performance. Operating costs have increased as planned year on year as we've built up our team so to better position the business for growth over the next few years.

Speaker 1

And finally, our underlying profit before tax of £8,500,000 was ahead of analyst expectations. Moving on to Slide seven, where I'll talk through the key movements in our cash flow during the period. Although the Lithia transaction completed on 01/31/2024, the cash movements associated with the transaction completed on 2024. You can see a number of these movements on the cash flow slide, including the transaction proceeds and repayment of loans, the 10,000,000 investment in a North American JV and then finally, the £358,400,000 dividend paid to shareholders. While the accounting and legal steps were taken to pay the dividend, interest of GBP4.3 million was earned.

Speaker 1

In September 2024, we made an initial investment in Seas, acquiring 9% of the business for GBP4.2 million or GBP3.2 million. All of these movements, in addition to the cash generated from trading, led to a year end cash position of £9,300,000 In March 2025, we also received £9,900,000 from Lithia relating to a tax debtor as well as several million pounds from the equity raise in February 2025, so we are in a good cash position. But as Bill will take you through in more detail later, we have a strong pipeline of strategic opportunities, and we are continually looking for ways to maximize the growth of the business. On Slide eight, you can see the end of FY twenty twenty four balance sheet. And the headlines from this are: closing shareholders' funds of £39,000,000 with the main driver to the reduction being the £358,000,000 dividend The £9,600,000 investment in The U.

Speaker 1

S. JV, this is the initial £10,000,000 investment less our share of costs incurred during FY 2024. The other investment of £3,200,000 is the initial Seas investment. Other intangible assets of £16,300,000 is the capitalized software asset that has increased as resource levels and development work have grown during the period. The £21,400,000 receivable balance includes the £9,900,000 tax debtor.

Speaker 1

And the final balance to call out is the £9,300,000 cash balance. In addition to this cash, we also have a £10,000,000 RCF facility, which remains undrawn. On to Slide nine. There are a number of non underlying items, most of which relate to the Lithia transaction. There were £2,200,000 of restructuring and transition costs following the Lithia deal and transaction costs of £900,000 In addition, pounds 4,300,000.0 of interest was earned on cash held while the special dividends relating to the transaction was being finalized.

Speaker 1

Other items include the share of the JV results, which was a cost of £500,000 and share based payment charges of £1,000,000 I'll now hand back to Bill to run through the operating highlights and the

Operator

strategy. Thanks, Oli. I will now take you through some of the highlights for the year and early progress we've made against our strong strategy. Key to our growth this year has been the significant expansion of our user base, which was up 6% to more than 35,000 users. Alongside this, we maintain our focus on vertical sales or upselling into existing customers as well as new customer wins have also driven revenue increases.

Operator

Ollie touched on the net churn we saw in our customer base, which remained exceptionally low at just 1.1% for FY 2024. This shows the strength of our solution and the sticky nature of our customer base, which supports an attractive rate of recurring revenues. Given the increasing impact of vertical sales, we feel that user count is not the best metric to assess our business performance. As we move forward, we'll currently look at other potential alternative measures. We also signed a five year contract with Marshalls to implement our full product suite across all of the dealers across The U.

Operator

K. Winning the contract with one of the top dealership groups in The U. K. Is a significant milestone for the business. We are looking forward to getting started on working with Marshalls, and we expect the rollout to begin in H2 twenty twenty five.

Operator

Moving on to Slide 12. For the past year, we've had it very clear that North America represents a significant opportunity for Pinewood. As such, a key area of focus in 2024 has been preparing for the system rollout there. Our product and development teams are making good progress in enhancing the system to U. S.

Operator

Customer specific needs. We remain on course to pilot the system in North America in the 2025, with the full rollout beginning in mid-twenty twenty six. In recognition of the potential we see in the market, we'll be opening an office in North America, meaning we'll be closer to new and existing partners. This space will be opened during 2025, and we've already started to recruit our North American team. Last year, our technical teams were hard at work developing a new user experience for all Pinewood system customers.

Operator

I'm delighted to confirm that we'll be launching during 2025 after several years of development work. This is a complete update to the front end of our system and all parts of our customer usage. The underlying architecture of the system remains the same, supported by market leading security measures. As we have one version of the system used in all countries that we operate in, the significant enhancement in user experience will benefit all of our customers. It will be used in all system rollouts going forward, including Marshalls, Lookers and our North American pilot.

Operator

We look forward to sharing more of this with you, including some of the new features once the UX launches later this year. Finally, in the year end, we signed a major new contract with Global Auto Holdings. They are one of the biggest auto retail groups in the world with franchise dealer locations in The UK, North America and Scandinavia. The largest part of their group are the ex liquor stores. They are one of The UK's largest auto dealer groups.

Operator

They also have a sizable presence in North America and Scandinavia. The agreement is well aligned with our strategy with global auto, global footprint, certainly three of our four strategic pillars. In recognition of the scale and nature of this agreement, we issued Global Auto with a cashless warrant for which the strike price is 330p. The warrants are not only exercisable once the Pinewood system rollout is completed in separate geographies, with 5% relating to The UK, 1% to North America and 1% to Scandinavia. Another significant event in the past year is that we took the acquisition of SEAS, a leading AI machine learning and AI generative automotive platform.

Operator

This follows our initial minority investment in SEES, during which time we are impressed by the quality of their technology and the potential it had to bring further benefits to Pinewood users. We, therefore, took the decision to acquire the remainder of the SEES in February 2025. At our Capital Markets Day in October 24, we outlined our approach to expanding our products and adding new verticals. In summary, we said we would weigh up whether it made sense to build the technology in house, buy the technology to accelerate strategic progress or partner on some products through a revenue share agreement. In this case, we took the decision that the speed with which these would bring benefits both to our customers and to Pinewood's earnings profile far outweigh the cost and time associated with developing the technology ourselves.

Operator

In the short term, chatbots offer an opportunity for significant revenue generation, particularly in North America, where over 90% of dealers are using some form of AI chatbots. Lithia's commitment to install these chatbots into all their U. S. And UK stores will not only enhance revenue as soon as they are launched, it will also an opportunity for break into the market for Pinewood dot ai, branding across all of North America. Pounds 26,700,000.0 of the £35,700,000 of gross proceeds generated from the equity raise was used to fund the cash element of the Seas acquisition, with the remaining proceeds used to accelerate Pinewood's growth opportunities.

Operator

On to Page 16. In terms of how we have progressed against these strategic goals, we couldn't be more pleased with how the Pinewood team have responded. On The UK and Ireland, we have already achieved our objective of securing two top 20 UK dealer groups is a huge achievement and underlines the confidence that customers have in the Pinewood system. Internationally, we continue to pursue a number of avenues where we have shortlisted for a number of sizable contracts in Central Europe. We continue to expand our vertical sales channels or develop a number of new revenue streams in house in areas that haven't previously been monetized.

Operator

Finally, in North America, we are extremely pleased with our progress so far. Our product development teams are making excellent progress in localizing work needed for North America. And finally, on to Slide 18. As we look as we've set out, our priority in the upcoming year for The UK is to replicate what we've done with Lithia UK with Marshalls and Lookers, and delivering a best in class system implementation, which will enable them to run their business more efficiently, more productively for a significant reduction in costs. We have added talent and expertise to our already strong sales team, and we are confident that we are well placed to add to our customer base in the top 100 U.

Operator

K. Dealers. As outlined in the strategy section, our priority markets remain North America, Central Europe, Japan, Southeast Asia and South Africa. And we are confident in the pipeline in each of these regions. We are focusing on rolling out our new user experience during 2025, which we think will significantly enhance the customer experience on what is already a market leading system.

Operator

So looking ahead, we expect underlying profit before tax for FY 2025 to be in line with current market expectations. Beyond that, our previous guidance for FY 2027 was underlying EBITDA of GBP 30,000,000. We're increasing this to a range in the mid- to high 30s for underlying EBITEDA in FY 2027. Thank you for joining us today, and we look forward to any questions.

Speaker 1

Questions now. Jack's going to come around to in room ones first with the microphone, so if you've got a question in the room, then we'll take the outside room ones after that.

Speaker 2

Thanks, Simone. It's Kieran Donnelly from Berenberg. A few for myself, maybe just to kick off first. In terms of the commentary around the potential scenarios for The U. S.

Speaker 2

JV, I guess, without kind of sharing too much, could you just talk us through what kind of the range of scenarios you see and potentially what you see as maybe an optimal scenario?

Operator

Sure. So ultimately, the JV, I think, was a great way to break into North America. Our product is great. We're in 21 countries. It works.

Operator

We know we can go into North America. The uniqueness about that structure is that we got to partner with Lithia. So we had access to they're well over 300 stores, and they've given us thousands of man hours worth of their time and effort to help us bring the product to North America. But on a go forward basis, with the current JV structure, there may be some limitation on us being able to break into the market, oftentimes not too dissimilar than we had when Pindragon was the owner. It would be a limiting factor in being able to sell to other dealer groups.

Operator

So we're in discussions with Lithia right now in a number of different ways to look to exit them from the JV possibly and for Pinewood to take control over in total. And there's a number of different ways you can do that, whether it's cash, whether they're a financial instrument, maybe exchange for equity for equity or a combination of two or three of those in conjunction with all that. But they've been great partners, and they're very receptive to the conversation. So hopefully, sometime later this year, we'll be able to come to the market and let everybody know where we're at.

Speaker 2

Maybe second question, just on the international pipeline. It sounds like that's progressing quite well. You clearly had great success in The U. K. Is there any kind of different dynamics that we should be aware of in terms of winning new customers in the international market versus The U.

Speaker 2

K? Any differences, I guess, will be interesting to you.

Operator

I mean there's definitely differences in localization, operating systems are slightly different the way people transact. The nice thing about our system is very flexible, so we can accommodate that. Other of our peers or competitors out there actually have different systems for different parts of the world. That's very difficult to maintain multiple systems, multiple version of those systems. If you have stores in multiple countries and you have one system for one country, another one, it really puts a lot of pressure on the dealer group and a platform like ours, which borders really don't matter, we're language agnostic.

Operator

So we can facilitate multiple countries, multiple language, even multiple languages within a single footprint gives us a great advantage. Just how you can see some of the economic headwinds out there, whether it's inflation, interest rates going up, potential tariffs and whatever else, there's definitely headwinds on costing within the dealer groups. And a platform like ours gives them the ability to be much more efficient, generate higher productivity and ultimately lower an overall cost of operation. It really puts us in a good position going forward worldwide. And maybe just final one from me.

Operator

Great to

Speaker 2

see, obviously, upgrading the FY 'twenty seven medium term target. Maybe, Ollie, could you just touch on kind of visibility in terms of, obviously, short term, but maybe going out to FY 'twenty seven, kind of obviously, you've given a range of mid- to high 30s. How should we think about that? And I guess in terms of the visibility you guys have

Speaker 1

at that point? Yes, sure. Look, before, when we did the CMD back in October, we came out with £30,000,000 for FY 'twenty seven, which at the time we said we were confident in and there was upside potential. And we're in the same position now with that mid- high 30s. Look, we think we've since then, we've signed the Global Auto deal.

Speaker 1

We've bought Seas, and we think, look, we're very comfortable with that point. So look, we'll see how things progress. But look, in terms of Marshalls and Global Auto, we think by that point, by the start of 2027, they'll both be on. And Look Seeds, we've had a really good start. We're only a few weeks in, but we're already in a really good position with them.

Speaker 1

We're very excited to say that we think there's upside potential there, but we're confident in the FY 'twenty seven numbers, the guidance we put out.

Operator

And Kieran, the way the rollouts go and because it takes a chunk of time to be able to do that, I mean, you start looking out forwardly, we can to Ollie's point, we can look and know that we'll get Marshalls and Lookers on between now and the 2026. You pretty much know what the revenues, EBITDA and ultimate net will be of that. So we're very confident that there's not a lot of volatility to that even if we signed up another large customer by the time you do the behind the scenes work, get implementation. You have to align to different contract periods with them. Even if we sign someone else big, it wouldn't necessarily be a huge add into 2027, it might be modest, but that would really play off into 2028.

Operator

And that's just the kind of sales cycle and the life cycle that goes with this. Big thing

Speaker 1

is Kieran, just to add into it, is that we get a question on the recurring revenue quite a lot, and we don't see a big change in that going forward. So historically, we've been in that 85% to 90% range, and we see staying in that range going forward. So it gives us great visibility and confidence in what we've got coming through.

Operator

Great. Thanks.

Speaker 3

Andy Wade from Jefferies. A couple for me. First one, KW Brunn, the European distributor. How confident are you in the 200 sites there that they're going to be part of the rollout opportunity?

Operator

So in that transaction with Global Auto Holdings, within that, there's eight dealerships there that they bought directly and they're putting onto that system. I can't speak for Global Holdings and it's not part of the deal, but it doesn't make sense to have eight stores on one system through the distributor and the other 200 on various different systems. In conversations with them, ultimately, they would like to go down to a single platform. And I think we're in the pole position for that, but can't comment to it. We haven't figured that into any of our forecast or whatever else, but we think that's a definitely opportunity for some upside.

Speaker 1

Cool. And it plays into our sort of USP, if you like, for groups of size and scale, reducing that headcount cost and operational efficiency. So we can't speak for them, but we think that same plays into that.

Speaker 3

I guess once you've tried it. Yes. Okay, cool. Second one, any sort of color you can give us as people are closer to it on sort of progress that Techeon is making, given that sort of a bit of a forerunner for what you're looking to achieve out there?

Operator

Listen, they've got a great product. They started in 2016 from nothing and have built themselves into a big player. They're not sure the exact size here, but I think they have probably about the same number of users that we do give or take. Overall, the nice thing about them is they're kind of plowing a road for us, so we get to go in behind. Right now, I think they've got some challenges with some of the incumbents.

Operator

There's multiple lawsuits flying back and forth at each other between some of the incumbent systems and themselves. While they work through that, we continue our path in partnership with Lithia. And as that sets out, I think that just helps us as we go forward. It's a huge market, 20,000 groups. I'm sure they will come out ahead and be competition for us, but it's a big market.

Operator

And with 20,000 opportunities out there, they can have their piece and we'll take ours.

Speaker 1

Great.

Speaker 3

And then last one, I risk this being a very naive question, but I'm going to ask it anyway. The decision makers for you are obviously pretty senior in the businesses, right? I'm just sort of genuinely interested why you need why you really need to bulk up sales teams when it's the senior guys that are the ones that well, guys and girls, that make the decisions. Interested in the process side of things, really.

Operator

Well, part of it is just because we're off 21 countries, so there's just size and scale to be able to handle that way. To the point that Oli talked about and that I referenced being the vertical sales channels, well, like a global Aldo Holding or Marshals, Aleni, the senior management team would be involved in that. When it's a new product that we're selling vertically through there, that's probably not going to be handled at that level, and you'd have a traditional sales associate do that. Some of the AI chatbots that Sees is going to bring to the table for us, it's easier for our team to go out there and sell that in there. And you've got to think a lot of our current customer base is the small to medium sized dealers.

Operator

We are kind of locked out in the past because of our ownership by Pindragon. So now that's off, that's how we got Marshalls and Lookers and opened up that market. Those still might be handled by Ollie, myself and the senior management team. But the five, ten, fifteen, twenty store group, have account managers, they have great people they work with, That's who they know and that's who will sell through them. It's actually a really good question.

Operator

But then again, we've got stuff in Sweden and Switzerland and Japan. I don't they're only like I think a day behind us or ahead of us or something like that. So we have other people over there handle that one.

Speaker 4

I'm Damndi from Peel Hunt. Maybe other people know the market landscape well. I just wanted to ask, is Central Europe, Japan and South Africa, the region, especially Central Europe, is the competitive environment very similar to North America? Are they the same players? And relatedly, I was just going through the Techeon versus CDK lawsuit that is interesting even when they had that court win where the data was supposed to be handed over, they made Techeon drag on in that, I think it's a foresight trial, essentially forcing Techeon to spend money before go live and get charged.

Speaker 4

Do you see similar kind of competitive environment in those other regions or

Operator

Not necessarily. So I can talk to the Techeon in that piece in a second. But if you go into France, for example, it's a handful of French platforms that exist in there. Reynolds and Reynolds from The U. S, Keyloop have a moderate stake there.

Operator

If you go into Germany, there's like 20 different companies doing this. Of all the countries, you would think there'd be some more standardization and structure as kind of a free for all. And nobody really has much more than low double digit share like 1012%, 13%. So that actually opens up a really good opportunity because it's just so fragmented and people are on multiple systems, especially if we're able to partner with an OEM, we can come into it. Nothing is quite like The UK, where right now we're pretty much us, CDK, 10%, 15% with some small groups out there.

Operator

You get into North America, three groups right now, incumbent groups have prior to Tech at about 80% market share. I think that might be down to 75% at CDK, Reynolds and Reynolds and Dealertrack. Now you have Tech Yen coming in. There are a few small players kind of floating around, but they're incredibly small. Data is everything at the end of the day with this.

Operator

One of our best strengths is, yes, we have a great tech stack, but the purity of our data, this is also what powers AI. So with the CEs combination, having access to this pure data stack sits here and really supercharges that product. We there's multiple different ways to access data and to be able to get it out. And over the years, we've become very creative with that within working within the confines of whatever the local rules and regulations might be on that. But it will be interesting to see how the CDK and Tekion lawsuits because now CDK is suing Tekion for piracy and hacking and everything else.

Operator

So those are some pretty big allegations. But by the time they're done beating each other up, hopefully, there'll be clarity on directionally which way everything goes.

Speaker 4

Can I also ask, I guess, it's a month or two ago, the NADA conference, NIDA conference was there in The U? S. And I was looking at this long term data trend that one of the chaps was presenting. It's interesting for a very long time, in aggregate, the dealers were basically making 2%, 3% PBT margin. And then obviously, COVID changed everything, new car versus used car.

Speaker 4

And then there's kind of a mean reversion happening, I suppose.

Operator

So I can plot this out for I've been in automotive for thirty years in North America. It's a cycle. It happens where genius is one minute and maybe not quite so much the next, whether it was ninety two in the dot com bust, the financial crisis, nineeleven, now COVID and supply chains and different things like that affect this stuff. But in aggregate, for a moderate sized dealer group with a mix of brands, if you're at 3%, you're doing a

Speaker 4

good job there. Does this kind of coming off the peak present you guys an opportunity

Speaker 1

in Absolutely. Any

Operator

Absolutely. So you don't have I mean, now, there's maybe a few more headwinds in The U. K. You heard Virtu a month ago or something talk about the headwinds of GBP 10,000,000 between minimum wage and the new tax on national insurance and as such. You have similar pressures, but slightly different in North America, whether it's increased interest rates, inflation, who knows what how the tariffs are going to affect into that.

Operator

But you have the traditional headwinds and things are kind of normalizing. So we're not in the peak or a valley, we're kind of in that trough. And a system that can give you higher efficiencies, generate more productivity and ultimately give you a lower cost of operation really are attractive at that point. And when I'm saying lower cost of operation, it isn't that our platform costs less than a competing platform. It's hard ever hard to really compare because everyone's got different ways of doing it.

Operator

It's our system facilitates the ability to operate with a much lower number of people to be able to sit here and do it. So a lot of the stuff that Olli did prior life in conjunction with Pinewood facilitated an accounting platform that doesn't need the same staffing model that the incumbents have currently in North America, for example. So yes, this opens up huge opportunities. And to your thing here, talking about long term data stacks in North America, this is one of the keys because if you look at the incumbents, I mean, they've got they bought lots of bolt ons and third party layered apps, but they only have transactional data. They can't get the CRM data that's in a different layered app.

Operator

Some of that comes through used cars are a different one. Aftersales is something completely different. CRM is a completely different world. And if you're trying to aggregate data, you're trying to copy from all these different things here, there's multiple duplications, it's virtually impossible to truly cleanse it out. I mean, never get one version of the truth or one version of your customer.

Operator

And on a modern platform like us and the way our system is set up, you get a pure data stack, which really becomes a value to go out there and drive this up. When we work through this with Lithia and we walk through our vision, they literally looked at this and their biggest expense is SG and A and biggest part of that is human capital. And they're starting to look at it, well, I can reduce this many people this, if I can get lead conversion up one point, if I can get an extra tenth an hour per day per tech on their size and scale, this starts to ratchet up for them very, very quickly. So as we go into there, we have a compelling message. Better tech stack, more secure, higher efficiencies, higher productivity, lower overall cost of operation.

Operator

It's not the easiest it's not the hardest conversation to have with a car guy.

Speaker 5

Bear with me one second.

Speaker 1

It's Catherine from Edison. Just I think you already hinted at it. Automotive tariffs, what are your thoughts on how that will affect dealers in all countries that you operate in?

Operator

Well, I'll put it how it affects us, then I can I'll give you a context just on my experience outside of the tech side. Tariffs exist and gone back and forth. Like I said, I've been doing it over thirty years in North America. The original version of NAFTA and whatever else. They're constantly going out there.

Operator

Personally, I don't think there'll be something that lasts for five years or something like this. I think this is an end to me. It's just my own personal opinion. There'll be some disruption in the short to medium term. And then ultimately, everything will ultimately layer out.

Operator

As far as it affects us directly, it kind of goes back to that example. We can still give if you have more headwinds, if you have margin compressions, if your prices are going up, if your costs are going up, a platform like us helps mitigate some of those threats. So whether it's the higher minimum wage or the increased national insurance tax here right now or it's a tariff on cars that pushes that up or interest rates or whatever else, we can give a more modern tech stack, a better customer experience for a lower overall cost of operation and makes a product like ours even more necessary today than it would have been yesterday. Just to add some color to that

Speaker 1

as an example. So in a dealership, technicians, every minute is chargeable. And if as Bill was saying on competitor systems, if you've got four or five different windows open, having to navigate around those, taking five or ten seconds isn't a big deal. But if you've got 10 or 15 technicians in a workshop having to do that fifteen, twenty, 30 times a day, it stacks up and makes a big difference. So we can see that, and we've seen that with our customers.

Speaker 1

And that's one example. But as Bill said, in times like this, that makes all the difference, and it quickly shows in the bottom line for our customers.

Speaker 6

Ian from Progressive. Just trying to get my head around. You talked about the data stack and the tech stack. One of the things about car dealers is they don't make money selling cars. They make money from servicing cars.

Speaker 6

So when you're going to the customers, what are you selling? Are you who do you pinpoint, the head of aftersales, the head of used, head of

Operator

Well, first, I'll disagree with you. It depends on what part of the world you're in. The most profitable and the highest flow through within the revenue stream within the dealership is finance and insurance. In North Touchy point in Touchy point in this country. It is.

Operator

But still, even though it's nowhere near as high of a revenue stream as you get in North America, the flow through is extremely high. So no, after sales and we have different products and different components that facilitate different aspects of the sales journey. So we have obviously a CRM and a front end tool to be able to engage with the customer in the early stages, be able to present offers, whether that's digitally online, in person, part exchanges and all that type of stuff. And then we have the same thing for finance and insurance, a very rigid pathway to make sure we comply with all the local rules and regulations, no matter what part of the world we're in, whether it's GDPR and how do we disclose different things in The UK context. And then in the after sales, we have a very mature product called Service Intelligence, which gives the ability for a customer to engage digitally soon via a bot, off-site this and be able to do what Ali was explaining, be able to track the whole progress through.

Operator

Generally, when we're having the conversations for a group, you're normally starting at the top side of the business and giving them a whole customer journey. This is how your sales process would look. Now obviously, it's flexible to accommodate if you want to do it outside of the core pathway and the same thing with service and the same thing with accounting. So it's a holistic approach. I talked about it and Oli led this with Pindragon many years ago.

Operator

We took the back office accounting from well over 400 people to just over 200 people because of Pinewood and because of the way that tech stack is. If our product did nothing else but just do that on a mid to large size store, it more than offsets the cost of the product coming into it. So once again, depends on the audience. Some people are more sales oriented, some people are more service oriented or just overall cost oriented. We're able to sit here and cover all those.

Operator

The best thing about our product is, I would say, we're industry leading in every single one of those aspects. So it's a holistic approach to going out there. But once we talk to a CEO, CFO, you're always talking to the CTO or the tech guy, and then you're talking to the business leaders for each one of the individual departments.

Speaker 6

Thanks. And looking ahead, we always get very excited about top 10, top five, whatever. Where are you where do you think the sweet spot is going to be for you going forward? Should we be sitting there waiting for top 10 announcements? Or are we happy with the top 50, top 60, don't care?

Operator

We're not going to probably even keep referencing that anymore. That was one of the challenges we had last year and a lot of the questions that were brought up. We had at that time in the high 25% to 30% range of overall rooftops within The UK, but it was the mid to small sized groups because we were kind of locked out of the large groups because of the old ownership. We're in a good place now. We want to serve all customers.

Operator

So if you have two stores, 10 stores or 300, we want to be there for all. So it's not just to target the big ones, it's how can we penetrate the market to the fullest.

Speaker 2

Kieran from Berenberg again. Just maybe looping back on one point. On the North American go to market strategy, I guess, could you talk about the Seas sales cycle relative to the Pima core platform sales cycle? I assume it's shorter. Therefore, I guess, could we think about CEAS almost as a kind of Trojan horse in terms of entering some of these U.

Speaker 2

S. Auto dealers, obviously ex Lithia?

Operator

Yes. So we just I actually kind of mentioned that in the script. But CEAS outside of where Pinewood exists and through our current footprint, C's will remain branded under C's. So whether in The Middle East, Mexico, South America, Australia and such, it will be C's. As they go through our products here, it will be incorporated in the pinewood.ai, and that's where we're going go to North America with it.

Operator

Luthority is already like the product they have. We're localizing it and that will be able to roll out. Yes, the sales cycle is much shorter there. It's weeks and months, not quarters and years, to be able to go out to market with that. And in North America, that will be our first entrance into the market.

Operator

And absolutely, we want to be able to leverage off that over time. I mean they have some great tools that we haven't even talked about that will next time we sit down, we'll be able to go over with everybody. But those will definitely be things that could literally pivot us in and be able to start there and then be able to put our core system in, in conjunction with that. Thanks.

Speaker 5

And there have been a few questions through on the web chat. A couple from Roger Phillips at Investec. The first one is, can you talk about the outcome from competitor cybersecurity issues last year? Is that accelerating any competitive landscape shift in The U. S?

Operator

I don't know if it's shifting the competitive landscape, but it's definitely on everybody's radar, where I think in the past dealers looked at their own networks and their own vulnerabilities. They didn't maybe necessarily look at the OEM or their core system provider. I think just by the nature of it, you would have thought it's secure. Any large group has cyber hackings everywhere and they're going after everybody. Our system is different than theirs.

Operator

So we've got as high of a security, a cybersecurity platform as you can possibly have. Our risks are more if our actual cloud hosting through Microsoft got hacked. That's something I can't protect against. But save that, we have the highest. But going into there, we even talked about it in the script, is cybersecurity is now a talking point where in the past it wasn't.

Operator

And it's a top two or three talking point now, where in the past it was just an assumption that it was there. But it's definitely on everyone's mind now and it's a point of I wouldn't say contention, but it's a point of conversation. I will say the team for years has done a really good job focusing on that. We continue to focus on that and we continue to find ways to beef that up, whether it's internal hackathons on ourselves trying to break into our own system. We do pen testing.

Operator

Outside of it, we use third party companies to be able to facilitate and look for vulnerabilities and stuff. But we feel confident where we're at right now.

Speaker 5

And Roger's second question is on the Lithia rollout. He asks, can you talk about what the key software development milestones to hit in the next year are? And if there are any change to time scales there?

Operator

No. I mean the timescale is, as much as anything, is going to be on our customer side, whether that's Lithia or anybody else. These are you've taken a huge company. I think this year, call me, but I think the trajectory is to be close to €40,000,000,000 in revenue. I mean they're selling 700,000 cars a year.

Operator

So changing your core system is no small effort. So in as such, we're going to go out there pace and speed. The core integrations that we have to do, first and foremost, are the OEMs. While you would think Mercedes Benz in Germany and The UK and The U. S.

Operator

Would have the same tech stacks and same integrations, they don't. And they're, for the most part, bespoke by geography. So the biggest hurdle is to get through that, but we're progressed quite far with several of the OEMs. We don't have to have them all done at once. So if we start with OEM A and have a pathway there, we can start rolling out stores there and then BC.

Operator

The only thing that does is instead of being able to roll out geographically, you're going to roll out by OEM, which is fine and we can facilitate that. Tax, title, licensing is probably the most complicated thing in North America. Anything else that we don't have, if there's some nuance or whatever else, we can write an API into a different application if we feel that that's needed and or and what we've done in most cases is just write our own solution in real time. It's what's great on being on modern tech stack and having a product and development team like we have. If there's an opportunity, we can go out there and go after ourselves.

Operator

But the biggest one is tax, title and license and OEMs.

Speaker 5

And the final question is from James Musker at Singers. He asks, please could you speak about the terms of the Lithia deal in The U. S? Are Pinewood or Lithia tied to any exclusivity arrangements? What still needs to be agreed to roll out in Lithia's U.

Speaker 5

S. Sites? And what has already been contractually agreed?

Operator

No, there's no limitations. Ultimately, contractually, as long as our product is viable, they're obligated to go on. We haven't, through the '8, to facilitate that. Outside of that, the only thing that's left is pricing. But in conversation, we're aligned on pricing, which compared to The UK pricing is quite favorable on both sides.

Operator

So it gives them better than what they currently have there and gives us a much higher if you use on a per rooftop or per user basis, it gives a higher revenue streams from there. But none of that's been finalized. It's just been talked at the highest level. But once again, they're partners in the JV with us, which hopefully we'll be able to look for a different structure than that later this year. They're a shareholder or our largest shareholder in the PLC, and they've been nothing but great partners.

Operator

So for them, this is a huge opportunity for them. So first off, they get to be a first mover. They get to get all the advantages. They don't look at this as a Lithia solution, but an industry solution. They just get to be the first ones to take advantage of it.

Speaker 5

There are no further questions on the web chat. So I'll hand

Operator

it back to Ben and Ollie for any closing remarks. Listen, it's an exciting time. It's we accomplished a lot in the year. I tend to set insane expectations, and the team met every single one and you're going back too far. And the team exceeded every single one of them.

Operator

So just a great thank you to the entire Pinewood team for all their hard work and effort and appreciate all of you coming out

Speaker 1

today. Okay. Thanks, everyone. Thank you, Keith.

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