A workforce of robots

Alan Kohler here with today’s CEO and it’s Guy Maine, the CEO of a small business named BidEnergy.  Bid Energy did a backdoor listing in 2016 and this year it’s a 10-bagger, it’s up from 1 cent to 11 cents just this year, so it’s on the move, Bid Energy.  Actually, it was less than 1 cent to now 11.5 cents, so more than a 10-bagger this year, but obviously it’s still pretty small, 11.5 cents, and the market cap of the business is $70m, a micro-cap you’d have to say.  It is still burning cash, they’re projecting to go cash positive in a year’s time.

What do they do?  They have a workforce, as he puts it, of robots or RPA (Robotic Process Automation) that checks electricity bills, energy bills, mainly for large customers, large companies with multi sites.  They’ve currently got a whole lot of customers with an average of two or three hundred sites each, that is to say stores or whatever, customers like Cotton On, Optus… 21,000 sites – they charge an average subscription of $15 dollars per month, but the subscriptions range from $5 dollars up to tens of dollars per month in subscriptions.

They’ve launched in the US and they’re in the UK.  Guy Maine says that it’s definitely a global business, he says they’re the only ones doing this, they have first-mover advantage.  Obviously, competition will come, but they’re fairly well ahead of the game having built this platform over the last few years.  What they’re doing in the next couple of months is launching a retail version of it called BID Billy in the Australian market for what they call single site bills, for retail consumers to have their bills checked.

What they do is they check the bill to make sure it’s accurate, that they are getting charged the right amount, there’s no mistakes in the bill, and then they go to auction with all of the retailers in the market in Australia, which is 26 retailers, and they setup an auction for them.  They all bid for the business and you get the lowest rate.  This obviously is hot news in Australia at the moment with the ACCC report recently condemning the retailers for running effectively an oligopoly.  Bid Energy’s system basically blows that up and sets up competition. 

In the US there’s a thousand retailers so it’s a different system, but BidEnergy’s got all thousand bid styles into their robots.  They’ve trained the robots to recognise all of them so they’re off and running in the US.  I think it’s a very interesting business.  They’ve got some big families, the Baillieu’s, the Leiberman’s behind them in Melbourne and they’re clearly growing rapidly.  It’s well worth a look.

Here's Guy Maine, the CEO of BidEnergy.

Guy, just tell us exactly what Bid Energy does?

Well, Bid Energy is an energy spend management company for major multi-site enterprises, the likes of BP and Optus.  We manage their entire energy spend from collecting the bills, validating them, and in BP’s case all the way through to payment.  No one’s immune from the energy crisis impacting Australia, Alan, so we provide that unique solution for our large multi-site enterprises throughout the world. 

Just go through it one bit at a time, so you actually validate the bills, do you?  How do you do that, what do you do behind the scenes?

Just like anyone receiving an energy bill, they want to make sure it’s correct, they want to make sure they’re paying the right amount of money and obviously then paying it on time to reap the benefits of their rates.  We are a robotic process automation business.  The bills are sent to us from the energy retailers, they go straight into our robotic workforce and the first stage in that process is a bill validation service for our clients.  

How do you check that the bill’s valid?  Do you have data on how much energy they’ve actually used?

Yeah, we’ve got a number of data points that give us the information we’re seeking.  First of all, the robots go through the entire bill and they’re able to read and digest 23 data points on that bill, pulling out all the information.  On our platform we’ve loaded the contract that has been agreed between the energy retailer and our customer.  We also get half-hourly energy meter data from smart meters, so we’re able to validate half-hourly use against that bill.  Further, for our customers we store a data base of all of their bills, in many cases up to five years of bills per location, that provides us a further validation check in terms of any nuances we see in any new bill and whether we can see any evidence that something’s a miss.

And how much can you save them just doing that?

Well, believe it or not, there are errors in energy bills.  The first type of validation that we do is making sure that obviously the rate that they’re being charged is correct and contracted.  We look for fraudulent bills, we look for bills that are relevant to sites that are either open or closed.  Given for some of our customers they’ve got in one case over 6,000 sites – they were getting 6,000 bills every month and we’ve got to make sure that everything’s correct and the rate, the site being open or closed, that it’s a real bill, the dates are in line with previous billing.  You can imagine just making sure that for our customer, when they get to pay that bill we’ve checked and made sure it’s 100% accurate and 100% correct.

Right.  Can you tell me how much you typically save them just doing that?  I mean, is there an on average saving?

Yeah, at the moment, based on our total spend which is well over $250 million dollars of energy under management, we’re sitting for the last 6 months, 2.5% in savings.  We do find errors, rates fall off that should be honoured, there are errors in bills, it’s important for us that we track that down for our clients and get that bill to the point that we’re comfortable in saying it’s 100% correct so you should pay it.

I think you also then compare what your customer’s paying with what they could get from another retailer, or do you setup some sort of auction system and how does that fit with a contract that they may have signed?

For all of our clients who are obviously out there in the marketplace keeping an eye on energy rates that are available, we are in contact with all the 26 energy retailers in the marketplace.  Normally our enterprise customers are contracted for a period of time, not unlike domestic consumers, so it might be anywhere from a one year up to three years.  When our enterprise customers are looking at renegotiating, we obviously take them out to market.  But we’re a little bit different to some of our competitors in the same space.  What we do through our option platform, given we’re robotic, we’ve got very clear and concise data and we’re able to present basically every single site to all 26 retailers and they can bid for different geographies or different sites. 

We tend to find for our customers that they don’t end up contracting with just one energy retailer, they end up with a basket usually between five or six energy retailers who have strengths in different markets and therefore provides our customers with the best possible rates for every one of their sites.

How much do you intend to save them by doing that?

We normally save anywhere between 3-15% on top of what their energy rate will be and that’s just obviously providing or supporting competition in the marketplace.  Different energy retailers are going to have different strengths in different locations, whether they are able to provide their own energy or where they’ve got certain parts of their book to fill, being able to provide a multi-site answer for the energy bill for our customers is very important for competition.

What do you charge for this?

We’re a subscription service, so we charge a fee per month per site.  We like a long term relationship obviously with our customer base and if we sit back and look at exactly what we do, not only do we buy energy and make sure it’s the most competitive rate for our large customers and their multi sites, every time a bill comes in we’re making sure it’s correct and is good to pay.  What we say in sort of a two-line answer is, we’re always making sure you’re on the best rate and we’re always making sure that your bill is correct, and we always make sure that you pay on time.  That’s the service in a nutshell that we provide.

Okay, so what do you charge?

It differs based on the size and scale of the customer.  That rate could be as low as $5 dollars a site if you’re a very large multi-site customer and we’re talking many thousands of bills coming in every month, or for some of our smaller customers the fee is larger than that.  But, very economical way in managing your bill lifecycle management.  We are taking away from that accounts payable team or the finance or treasury team, the rigmarole of having to check every bill before it’s paid.  Some enterprises don’t even do that to the extent of every single bill.  Effectively, we’re a very low cost solution for energy spend management for such businesses.  

Can you tell us what your ARPU (Average Revenue Per User)?  Or per site, is there some metric you can pass onto us for that?  

Yeah, we’re sitting at the moment at $15 per site, per month on average.  We have just over 21,000 sites currently and that would give everyone a general view of what we charge per site.  Our average sort of site count would be around the 200-300 site count.

I see, so per customer, they’ve got 200-300 sites?

That’s right.  We have some customers that have 10-20 sites and we have some very large customers that have 3,000-6,000 and beyond.  That’s why it’s very difficult to pin an exact number on any client, it’s not just one rate for everyone.  The site count has different characteristics, they might have extremely large spends or in the case of some of our they might be more like a residential address.  That’s certainly so with the Salvation Army who we deal with.

Your run rate, 21,000 sites with an average ARPU of $15 dollars, that’s an annual revenue run rate of $3.8 million roughly.  What sort of cost base do you have and to what extent are your costs fixed and do you have any variable costs at all? 

Because the majority of our workforce is robotic, our cost base really just gets down to our core development and sales and marketing teams.  When we take on any new incremental business most of that goes to the gross profit line.  It’s rare that we have to add any core additional costs when we take on new business.  Fundamentally, our robots have been trained to read every single bill in Australia, the US and the UK, so if a new business comes on that core capability is available and ready for use. 

I’m just trying to look at your – can you help us out by just telling us what your fixed costs per month are?  I noticed that in the latest quarterly which is to 30 June, staff costs $942k for the quarter, administration $604k, research and development is $207k, so that’s $1.7 million roughly for the quarter.

Yeah, fundamentally our core cost base sits at around $450k per month.  We have a number of one-offs that we get through the June quarter and the September quarter which is all around compliance costs, around ASX listing costs, etcetera, etcetera…  But our sort of heartbeat core cost sits around the $450k per month mark.

Okay, and your run rate revenue is $315,000 per month.  What’s the monthly growth rate, can you tell us what that is?

Yeah, just in the last half we grew at 41%, so it’s our strongest six-month result in the history of the company.  Our aim is to double the size of the business this calendar year, we on track to achieving that milestone. 

How far off cash breakeven are you?

Cash flow positive is expected in just over 12 months’ time.  We’ve indicated to the market we’re expecting that in the December quarter of Calendar ’19 and that’s off a very reasonable business case and we’re tracking well to that target. 

You’re operating in the US as well at the moment, tell us how it’s going there.  Do you have competitors in the US?

We are yet to find a competitor that utilises robotic process automation, which is really our fundamental core differential in the marketplace.  It gives us the ability to take on scale at a very low cost base.  In the US we had quite a milestone moment in the last quarter, we signed up our first large national retailer.  What that does, the market over in the US is very different to Australia, there’s well in excess of a thousand energy retailers in that market and they differ very much state to state. 

Our robots need to be trained on every type of bill format for us to manage a national retailer, we achieved that through the last quarter and we’re now successfully managing bills for this particular retailer with over 850 stores and a presence across America.  That was quite a big moment for us.  We do also have Berkshire Hathaway as one of our foundation clients in the US.  But now our robots are trained in that market and we’ve got a core national footprint across the 49 states, we’re in effect open for further business.

When you say you’re the only one using RPA, or robotic process automation, in the US, are you saying that the people doing what you’re doing in the US are using human beings to do it?

That’s correct.

Goodness me.

They use a combination of spreadsheets and human beings and a guy with a laptop under his arm.  We’re the only ones in the world so far that is using RPA for management of energy bills.

And is your price the same in the US as it is here?

It’s a more competitive market but our recent tender success saw a rate that we utilise here for a similar size business, so it’s fairly comparable, but as you would expect it’s a larger market so a little bit more competitive but we achieved the result that we were looking for.

Are you going to have to train your robots on the billing systems of 1,000 energy retailers in the US?

Yeah, well that’s what we just completed.

You’ve done that now have you?

Yeah, we needed to do it for this client and we achieved that in the last quarter just gone.  Basically, we get all the bill formats for every single retailer, we’re able to create what’s called a passer or basically, the logic for the code to be able to read those bills.  And they don’t just read them, they digest the data points, so they actually look for a value and they look for wording and the robots are able to understand what that actually means and from that conduct a validation.  Basically what would take a human 20-odd minutes to be able to truly dissect an energy bill, we can do thousands of bills in the same time.

Are you going to be able to run a similar auction system in the US as you are here?

Yes, Cotton On, who’s one of our existing customers in Australia, they’ve just asked us to run an auction for 99 of their sites in the US and so that’ll be our first what we call a procurement event, but our first procurement event for energy in the US, so we’re very much looking forward to that. 

And you’re also about to launch, I think, a retail version of it, which I think is called Billy, is that right?  Explain to us what you’re doing there.

Obviously, as I mentioned before, if you step back and look at what we actually do for our big multi-site customers, we’re always checking the bill to make sure that it’s correct but we’re also in the market making sure we can get the best possible rate.  With BID Billy we’re taking what we do for enterprise and bringing robots to sorting out the mess and confusion in the Australian energy landscape for small business and residential, so we’re very excited about the prospect. 

When are you going to launch that?

We just have some trial customers that we’re working with right now but we’ll be launching with our small business and association offering in August.  Basically, those single bill customers will be able to load a bill up on BID Billy’s site, they just drop and drag their bill in, the robot’s able to read that electronic PDF and immediately dissects that bill and will do a health rate check against all the known offers in the marketplace for the 26 retailers.  It will then offer you the opportunity to basically bid your bill, so your bill will be bid to that marketplace and offers returned to you which you can take up and find savings which we know are out there for single bill consumers. 

The BID Billy capabilities really is the first time that customers will be able to get a non-commission comparison.  We don’t take commissions from the retailers so we’re agnostic to whatever is the best rate and who that comes from.  Second to that, they’re going to be able to ensure that they’re always on the best rate because BID Billy will constantly check for rates in the market, not just once but every time that you get a bill.

And how much will you charge for that?

To utilise the health check part of the service, before you take up an offer the service will be free.  We want everyone to get access to rate fair and non-commissionable rate comparisons in the marketplace and really only a robot is best suited to do that because they don’t leave anything off the table.  But if you choose to take up an offer that we’re able to find you that ensures you get a saving, then you’ll be charged an annual subscription fee which would not be onerous but we haven’t released the amount yet.

Right, what are we talking, $50 bucks a year or $200 a year, what do you think?

It will certainly be under $100 dollars per annum.

Will you be able to see that you’re going to make money out of it, that the price that you charge is going to be less than the savings?

Yes, exactly, the robot’s able to calculate based on – when you load up your PDF bill the robot’s able to work out a net per kilowatt hour tariff, we’re the only ones that will have that capability in the Australian marketplace to do that and is actually one of the ACCC recommendations is to have a rate that people can easily reference to.  We’ll be able to do that for every Australian through their bill and we’ll be able to offer you a selection of opportunities across all of our national energy retailers on a per kilowatt hour rate as well, so it’ll be a very easy comparison and Billy will be able to calculate not only the savings but if there are any switching costs involved they’ll be able to present that back to you.

Tell us a bit about the history of the business, I understand the platform was built by Anthony Dupree who has built a few of these kind of things in the past and he’s still involved in the company, isn’t he?

Yeah, Anthony’s our founder, as you mentioned, and Chief Technology Officer, so he’s very much involved with the platform itself and making sure that it’s constantly evolving and obviously with being a robotic platform we’re looking forward to more automation and more machine learning and AI in the future for our platforms, so it can do a lot more for our customers. 

Certainly, with BID Billy and our enterprise customers we want to take them to the point where we’re suggesting or the robots are suggesting ways in which to improve your spend, whether you’re turning on appliances at the wrong time of the day and we’re able to identify that obviously through half-hourly metred data and make suggestions that can, again, further reduce your bill.  Anthony is very much focused around that.  He’s a core part of the team obviously and he and I enjoy our working relationship together.

The company was backdoor listed in 2016 through, I think, a gold and copper exploration business name…

Cove Resources it was, yeah.

Cove Resources.  What sort of shareholding does Anthony retain of the business and who are the other big shareholders?

Look, we’re well supported in the Victorian sort of family high net worth marketplace, we’ve got some very good backers in that regard and…

Who are they?

Well, James Baillieu, who’s our Chairman, he’s been one of the strongest supporters of the business.  Obviously, Anthony himself retains a strong shareholding from the initial float and we’ve got some good support through some of the family offices in Melbourne as well.

What about yourself, I think you founded a helicopter business, is that right?

Yeah, well I had a corporate career over the last 23-odd years through businesses such as Optus, Virgin and Foxtel, then went and started my own aviation business and launched that from its first flight and was bought out by my business partners in September last year.  This opportunity came up and I was recommended to have a look and I’m pleased I’ve done so. 

So you’re going in to the US at the moment, have you looked around the world?  I mean, are we looking at a global business here?

You definitely are.  We utilise the Amazon platform in the cloud and really, all we need to do to go into any market, Alan, is get a copy of the bills.  We teach our robots the bills and once that’s been trained into the core code, then we can go and source opportunities.  We’re in the UK with BP.  We actually operate for them in 3 countries and obviously we’re keen to work with them to take that further.  We do actually own a business in the US which is a rebate capture business which is all about changing existing lighting into LEDs, but that gives us a fantastic base of customers in which to evolve the bid subscription strategy in energy spend management. 

We’ve had requests from some of our customers to move into other Asian markets which we’re looking at.  We also provide this service in New Zealand, so really there’s nothing preventing us from taking our core technology into any market.

What do you think the main risks to the business are?  I mean, obviously anyone can build robots.  Do you see competition from big players as the main risk or not?

Competition is always going to come.  You can buy robots off the shelf and they range in price, but none of them are trained on energy bills.  Every two weeks we’re taking now robots through sprints or really, code upgrades, making sure that they’re up to date with every part of this very dynamic industry and we’ve been building this over many years.  We do have a first-mover advantage, we’ve got to make sure that we maximise that and very clearly the next six months on the basis of a very solid last six months is all about taking the next step and growing into these core markets. 

When you sit down and do projections to the future, how important does the retail side of things figure?  What sort of proportion do you think you’ll be as a retail business versus an enterprise business?

Well, the enterprise business is our core, that’s what we’re focused on.  But, the Billy idea came from the need for some of our large enterprise customers having a solution for their franchisees and you would understand that the way the energy market works is the energy retailers will only give you a rate or price per ABN.  When you have a franchise structure you’ve got multiple ABNs, it’s very difficult to have one holistic rate for the whole organisation, so we built BID Billy to do that.  For us it was then a simple thought process in saying, well that’s working particularly well for some of our franchisees, let’s take that to the market as a whole.  The overall cost of doing that was quite small.  To answer your question, I see a lot of upside in going to the market in Australia and saying, well why shouldn’t every consumer out there always know that their bill’s correct, that their discounts haven’t fallen off?  It was a rate that was agreed to with the retailer, and why shouldn’t we always be going out there and getting them the best possible rate?  And really, BID Billy answers the majority of the ACCC’s findings in regards to having a much more transparent and hopefully competitive energy retail business.

Yeah, well that’s the point isn’t it, I mean this is hot news at the moment, all this stuff.

Yeah, it’s very much so.  In terms of our business planning, we’re very keen to obviously launch BID Billy in the market place because we know it’s a one-off.  No one’s brought robotic technology into bill management for the average Australian and I think to be honest, without getting too excited and ahead of ourselves, there is no solution like it.  It’s good for the retailers because we’re a non-commissionable channel. 

We’re good for the retailers because we make people pay their bills on time; we’re good for the retailers because we check the bill to make sure they’re accurate so they don’t need customer service people to do that for them; and we’re good for the community because we’re always identifying exactly what that per kilowatt hour rate is, where they are best positioned to take up an energy offer based on their actual spend and the fact that they’re not going to lose out on any discounts or any offers because we’re making sure every month or quarter that your exact tariff offer is there and correct.

Great to talk to you, Guy, really interesting interview, thank you.

Thanks, Alan.

That was Guy Maine, the CEO of Bid Energy, BID on the ASX.