Earnings call transcript: Qoria Ltd Q1 2025 sees ARR growth, stock dips

Qoria Ltd’s first-quarter earnings call revealed robust growth in annual recurring revenue (ARR), which increased by 25% year-on-year, reaching $137 million. According to InvestingPro data, the company maintains impressive gross profit margins of 79.4%, though the stock appears slightly undervalued based on Fair Value analysis. Despite these positive financial metrics, the company’s stock saw a decline of 5.63% to close at $0.355, contributing to a year-to-date decline of 27.55%. The company reported a net debt of just over $22 million and an operating cash flow surplus of nearly $20 million. However, there was no specific earnings per share (EPS) or revenue forecast data available for this quarter.

Key Takeaways

• Qoria Ltd’s ARR grew by 25% year-on-year, ending the quarter at $137 million.
• The company launched new products, EdTechInsights and CloudScan, contributing $3 million to the sales pipeline.
• Qoria’s stock fell 5.63%, closing at $0.355, amid a broader market downturn.
• The company is moving away from multi-year upfront contracts to potentially improve cash flow.

Company Performance

Qoria Ltd demonstrated a strong performance in the first quarter with a significant increase in ARR. The growth was driven by new product launches and an expansion in the U.S. education market. The company is also reducing hardware costs by 12% year-on-year, which is notable given the 25% ARR growth. These efforts highlight Qoria’s focus on operational efficiency and cost management.

Financial Highlights

• Annual Recurring Revenue: $137 million, up 25% year-on-year
• Net Debt: Just over $22 million
• Operating Cash Flow Surplus: Nearly $20 million
• Expected EBITDA Margin: 10-15% for the current financial year

Outlook & Guidance

Looking forward, Qoria Ltd expects ARR growth of 15-20% in FY2026 and aims to achieve an average revenue of $10 per student. Analyst consensus is strongly bullish, with price targets ranging from $0.33 to $0.44, suggesting significant upside potential. The company is focusing on product unification and international expansion, with a goal of becoming cash flow positive and EBITDA positive in the current financial year. For deeper insights into Qoria’s growth potential and comprehensive analysis, investors can access the detailed Pro Research Report available on InvestingPro, which covers over 1,400 top stocks with expert analysis and actionable intelligence.

Executive Commentary

CEO Tim emphasized the company’s impact, stating, "We’re now looking after more than 25,000,000 kids and 7,000,000 parents using our products every day." He also highlighted the company’s marketing efficiency, noting, "We’re generating literally 360 percent return on investments for every $1 of marketing."

Risks and Challenges

• Market Saturation: As Qoria expands, it may face challenges in saturating its existing markets.
• Economic Pressures: Broader economic conditions could impact spending in the education sector.
• Competitive Landscape: With competitors trading at higher revenue multiples, Qoria may face valuation pressures.
• Contract Structure Changes: The shift from multi-year contracts could impact short-term financial stability.

Q&A

During the earnings call, analysts raised questions about Qoria’s move away from multi-year upfront contracts, the softness in the UK market, and opportunities in various U.S. states. The company addressed valuation concerns and its future growth potential, emphasizing strategic initiatives to enhance its market position.

This comprehensive overview of Qoria Ltd’s Q1 2025 earnings call highlights the company’s strong financial performance, strategic initiatives, and market challenges, providing valuable insights for investors and stakeholders.

Full transcript - Qoria Ltd (QOR) Q3 2025:

Ben, Financial Executive: I think we’ve got enough in now, so we might as well kick off, Tim. So welcome, everyone, to our March quarterly results for FY 2025. Running the presentation as normal. Tim will kick off with his presentation. I’ll do some financial pieces in the middle.

And then at the end, we’ll we’ll turn over to questions. So as usual, you can ask questions through the q and a functionality. Or at the end of the presentation, I will unmute people’s microphones. If you raise your hand, join the queue to ask a question, we’ll unmute you one by one, and we’ll go from there. So handing over to you, Tim.

Tim, CEO: Great. Thanks, Ben. Thanks, everybody, for joining. Hopefully, everyone can hear me. So we also have Christmas one here who runs our revenue operations for k 12 part of our business.

So he’s available for answering any questions you may have as well. But, look, in in summary, it was a it was a pretty solid quarter actually and really the focus of the March given that it’s not the biggest selling period in our k twelve business or the consumer business. It’s really about sales up for the key selling periods of June and and into July, August. And without question, we we, in particular, team did that purposely well. We do like to highlight this slide at the beginning because, obviously, our business is a purpose driven business where we’re trying to support children’s journeys, online journeys.

We’re now looking after more than 25,000,000 kids and 7,000,000 parents using our products every day, and that’s pretty substantial growth. But what you’ll see here is our our financial growth has has is even stronger still. Our ARR is growing. I think we’ve had $25,000,000 of recurring revenue in the last twelve months organically, which is amazing result, more than 25% year on year growth. So we’ve added 18,000,000 in this financial year to date and coming into the biggest selling period.

I’ll talk more about that in a moment. Ended the quarter with a hundred 37,000,000 of IRR. Our balance sheet is in a great position with net debt of, you know, just over 22,000,000. Operating cash flow, massive surplus so far this year of nearly $20,000,000 and less than half million dollars for the financial year to date. So we’re delivering very, very strong top line growth, maintaining our cost structure really well, improving our gross margins really well, and most importantly, setting ourselves up for the, you know, the the killer end of the financial year.

Here’s the IRR of the last quarter in waterfall, and you just see the both parts of our business, the consumer k 12 business grew gross revenue really well. We were impacted by a little bit of positive effects movement, and, of course, as any enterprise business does, you have a bit of churn. But overall added $5,000,000 for the quarter which is on target and as I said 25% year on year growth again coming to I’ll keep highlighting this coming to the biggest quarter that we have every year and I’d expect to substantially improve that year on year growth through the as you can see on the regional splits, The US is obviously the huge market, the standard market. I think we’re we’re becoming, if not already, being being seen as the leader in that market where we’re starting to dominate, you know, 30 year on year growth in a very mature market is amazing. Custodial, I think that under states the performance of custodial business.

I think you’ll see certainly in the back half of this calendar year, very swift acceleration that business is doing brilliantly. ANZ is again, I’ve touched on this a couple of quarters, a highlight that stand out for this business. We’ve kind of retooled the business model in k 12 in Australia and New Zealand, and I’ll highlight something in a moment. Some really amazing progress that we have in these markets and as as you say, 33% year on year growth is pretty good. The UK, I think The UK Team should be applauded for what they’re doing there.

We don’t yet have all of our product development in that market. That’s some content aware filtering, classroom management, and some some data analytics tools. That’s coming. The cavalry will soon arrive. So we’re expecting the twenty sixth calendar year to be a growth year, substantial growth year for The UK.

So that’s probably the only thing that I’m I’m I wouldn’t say disappointed because I think the team are doing an outstanding job, but I think there’s room to significantly improve those numbers next year. Yeah. This this is a new chart we’ve put in, and really the purpose of here is to highlight how strong and reliable our business is. What you’re seeing here is a chart showing the weighted value of our k 12 pipeline over the last three years split by quarter. The comparison is to how much of that pipeline is then converted into actual gross IRR or contracted IRR in the next quarter.

And you see within a, you know, with a band that there is there is a reliability, a very much predictability in the numbers that we provide to the market in terms of why we pipeline and then the dollars that it turns to in exit IRR in subsequent quarter. Now the quarter three is the quarter that we’re in at the moment, also, that we just reported on and price pipeline was nearly $20,000,000. Our unweighted pipeline was at 40,000,000. It was $43,000,000. That’s an extraordinary figure.

The marketing team in The US, the sales team in The US have done an outstanding job building that pipe into this quarter. And historically, we’ve been converting somewhere around 70%, seventy five % of that pipeline. Now timings are always hard to predict, you know, within within a tolerance, but, know, that gives us a lot of confidence that Crispin’s team have set us up for outstanding into this financial year. And remember, whilst the main fiscal year end in The US is the June, there are some states, Texas in particular which is the second biggest region in The US, their fiscal year ends in August. So there is a sell through to really kind of August, early September.

So yeah, we’re set up in an amazing position and the pipeline is still growing, I might add. So incredible, incredible result. These stats metrics haven’t really changed since they were last reported except maybe the value of this business at about 3.3 times revenue is very much underperforming. Certainly, when I look at our private equity backed competitors, I was in The US recently talking to private equity groups that are in our space and EdTech beyond and, you know, typically, they’re talking eight to 12 times revenue multiples and yet we’re currently trading at 3.3 times revenue multiple. So, you know, I’ve got work to do with our leadership team to explain our story to the capital markets and and hopefully lift that in the in the coming months.

But I’m very confident that what we’ll deliver through June will give us an outstanding story to life, and hopefully, we can all see some appreciation in this in this this evaluation. Okay. Another new chart that we decided to put in this quarter because I think, again, it speaks to the the reliability of this business that we’re an IRR business. And what’s I think the market doesn’t understand is how how business. So we we have, for instance, The US, we have access to, for the most part, details on what all of our potential clients or school districts, you know, who their providers are, what they’re paying, and the kind of general contract terms.

And we can then load that into our CRM, and then we can allocate those opportunities across our sales teams and give them targets, and we have enormous amount of predictability in terms of the opportunities that we get when they come through the pipeline and how they convert, and then when we invoice and when it turns into cash flow. And the idea of this chart is to show you from the reported recurring revenue and how that converts into cash and revenue. I think the best chart to look at that is the chart on the bottom left. What you see here is our reported ARR, what we describe as exit ARR, and as I said before, our exit ARR at the March was $137,000,000 and what we’re seeing in the last two years is our exit ARR has almost to the dollar turned into the subsequent year’s revenue and the subsequent year’s cash collections. So again, very predictable.

So I think within, again, on subject to FX movements, think investors could probably have confidence that from January through the thirty one March next year, we should be collecting more than a 30. Always remember that figure is net of reseller commissions and reseller commissions goes to our margin. So I think that very quickly you can calculate that these businesses can be generating serious profits and cash flow in the next twelve months. So we have turned that corner again. This is highlighting how predictable that this business is and, you know, that inflection point.

This is looking at our cash flow and, again, adding another piece of insight, which which I think the market has been asking us about for a while, which is how cyclical are your cash flows. What you’re seeing here is our quarterly cash collections over the last three years split by quarter, and you can see on average in the March we’re collecting around about 20% and that’s the reason why we burned cash in March, burned less cash in June, but that’s the cyclicality of this business. The majority of our cash flow comes in that September quarter, followed by December not far behind, and as I said, in the March quarter. That’s cyclical at low point. So totally to be expected that this business burn a bit of cash in the March.

That will be less in the June, and then this business will never burn cash in our modeling from one to the other onwards. Okay. Christian’s on the line, but look, I’ll I’ll speak on his behalf, but but feel free to ask questions if you’d like. But the k 12 part of our business is is doing exceptionally well, particularly in The US where I feel like we’re I mean, we’re certainly dominant in The UK, but in The US, we are, without question, dominating. And all the kind of key things that we look for in our business are going the right way.

You know, the kind of lagging metrics of ARR growth of of churn and and renewals and products per customer and average revenue per student and average sales price. They’re all they’re all going the right right way. But what we’re also seeing at the coal phase is outstanding, you know, NPS scores and customer satisfaction scores, and even things like the ability of our team to respond to customer service requests, you know, inside thirty seconds. But we’re way ahead of everybody in the market in terms of that ability to understand customer needs, deliver products to them, understand expectations. So all of our kind of leading metrics are are going the right way.

And as a consequence, you’re seeing what you see here, which are lagging metrics are showing outstanding results. The highlights for me, I guess, are the two charts at the bottom, the average sale price is going up, which means that we are layering additional products and going upscale selling to bigger and bigger school districts, big enterprises, we’re talking about schools with more than a hundred thousand students and now regularly interacting with our business. But whilst doing that, we are also increasing the price points of the, you know, their student licensing, which is a very hard thing to do and we’re doing it really well. And I think that is a trend that you’ll see continuing. Very exciting to see what the sales team does in this June quarter where you’ll see that continue, but you’ll also see us having a crack at a lot of renewal opportunities.

So the kind of products we sell, the cross selling, the end end, the net revenue retention figure will be a a key thing that we look at and we’ll be reporting on in that June quarter. So, again, Kristen’s on the call. Oh, there’s a couple of things to highlight. We we’ve launched the EdTechInsights and cloud start scan products, which we promised last quarter, They’ve now generated more than $3,000,000 of pipeline that we I just spoke about then. We’ve we’ve already announced this, but we’re recently appointed as the preferred provider in Ohio, which is a very significant state, 1,800,000 students, it’s nearly half the size of Australia, it’s massive.

We’ve nearly reached 25% of Texas students on our platform and our Texas preferred partnership with Tassie, an organisation called Tassie, has now been extended for two years, I think it is, which is a huge pat on the back of this business. Texas is now our fastest performing region. And we’ve recently deployed our technology into a school district with 400,000 students, and it worked. And so we are incredibly proud that our business, which literally four years ago was selling into school districts with 4,000 students, we can now reliably deploy into school districts that are bigger than Adelaide and South Australia sorry, South Australia and West Australia combined. That’s the scale that we can now sell into, which is super exciting.

Alright. So a couple of highlights. I’ll just touch on it then. Tasi is the technology alliance for statewide initiatives. It’s essentially cooperative of all of the Texas education regions, 20 regions there.

All of the CTOs of those regions got together and formed this alliance, and they they worked collaboratively together to get better technology outcomes for Texas students. And a few years ago, they went out and scoured the market looking for the right safety and well-being products set for that market, and they selected us. And we’re really proud to announce that that’s been extended now for a couple of years. It’s our best performing region, we’re getting close to 25% of students in that region on our products. It’s 5,840,000, which is bigger than Australia, it is an outstanding opportunity and as we say here on the last point, Texas is very pro parent as you can imagine and it’s very much oriented towards empowering parents and grandparent schools to keep kids safe and the implications of that pro parent, pro safety approach is really driving business to us.

Their regulatory environment supports many of the things that we can uniquely provide, particularly the ability of parents and schools to share control of those learning devices. So we’re in an outstanding position to service that market, and I think that market is a great example of what is possible, and I think you’ll see similar regulatory moves, not only in The US, but outside. Actually, Chris, could I get you to talk about the New Zealand Trust? Because this is an amazing achievement for this business, and I’m super proud of you and the team.

Chris, Revenue Operations Lead: Yeah. Thank you, Tim. So what this talks to is a a partnership that we formed with the West Auckland Trust. Now the trust, as it says there in the bottom left, received their funding through alcohol and gambling taxes. And their their sort of MO in life is to invest in projects that deliver good to, you know, to to families.

And what we’ve done collectively is work with the trust to fund Pulse, which is the student check-in tool for a large number of schools within the West Auckland purview of that trust. And really that just opens up the opportunity for, you know, for students that are looking at a a way to have a voice and reach out at times for help, can actually get that through the funding to the trust rather than the schools having to fund it themselves. So and we, as it says in there, have integrated this cultural localization with Tamari, the the local language. So that is very unique to to the New Zealand market. And what we now expect and are seeing with other discussions is that this model with other trusts and there are multiple trusts across New Zealand and also communities of learning that are all interested in investing in children.

And they see not only Pulse, but we’re in discussions to expand that out to our other offerings as a very worthwhile investment of their their resources. So, yeah, a lot more to come out of this. And I’d love to see this replicated in other regions in the future as well.

Tim, CEO: Yeah. Thanks, Chris. Yeah. Look, what I love about this is we’re we’re now working with a very substantial community with underprivileged and, you know, disaffected kids in in New Zealand, and we can now be able to demonstrate the efficacy of these tools, you know, working with these communities, working with these schools. And that’s, you know, I’ve all everyone knows I’m massive fan for the well-being aspects of our business.

I think mental health for youth is a huge problem, and I see our business pushing further into there. And I think this now provide an evidence base for us to do that more more aggressively globally. It’s very exciting stuff. Okay. Our consumer business, look, I keep keep mentioning it.

It is just so well run, and it’s in such a good spot. One key highlight for us was we’ve been diving deep into the cost structure of that business, and we’re now generating literally 360 percent return on investments for every $1 of marketing in the consumer business. We’re adding about $4 of of margin of lifetime value. So that’s time to accelerate. We’re gradually lifting our investment in that market, but making sure that we’re we’re maintaining our, you know, financial disciplines and promises.

But that is an outstanding business. All the metrics going right the right way. In particular, churn is incredibly well managed. Every average annual recurring revenue is growing around 20% per year, and average revenue per account is consistently growing. We’re also now, without question, starting to see a moderation in our customer acquisition costs because we’ve got US schools talking about credit controls and talking about the custodial product.

And really, that’s that’s the kind of that’s the end game of this business is to allow us to put our foot down in the consumer part of our business, but not just have to pay for every customer that we acquire actually to get a resident benefit because we’ve got, you know, soon to be 20% of US schools talking about printer controls and our approach to parental controls. So that’s the game there and, yeah, really well positioned. I think really well positioned. That will become a big growth story for us in the next few years. And we also highlight there in the call out that SoftBank have now launched custodial through BSS, which is their subsidiary.

So SoftBank is now available through the sorry. Custodial is now available through SoftBank’s online channels. It’ll be available on their retail channels in the next month or two. And then we’re also hopeful if we if we do a good job there. We’re hopeful for a deeper relationship with SoftBank.

So, again, I I won’t go into much detail there because we’re in in we’re working on that with them, but a lot more to talk about there in coming months. So what do you what will I ask investors to look think about or look at for the next few months? So clearly, it’s k 12, June quarter, September quarter. There’ll be significant growth. Last year, as an example, we added $9,000,000 of recurring revenue across the business in the June.

You know, extrapolation of our of our conversion numbers from the slides I saw before would put that somewhere between, you know, 14 to 16. So look, we’re we’re hoping to deliver a very, very strong quarter. And again, there’s more to come in the August, September quarter with Texas. We should collect a little bit more money than the March in in so if you think about our cash collections profile, the main cash collection period is being highlighted in the previous slide, that September. So it’s mainly for this calendar year expecting to be significantly cash flow positive.

And for this financial year that we’re expecting to be materially EBITDA positive, you know, still forecasting somewhere between 1015% EBITDA margins for this current financial year. Alright. Hopefully, that was a decent summary. In twenty minutes, I’ll hand over to Ben.

Ben, Financial Executive: Thanks, Tim. So a couple of highlights from this slide. Something to point out around the March receipts is in the prior year, there was around about $500,000 worth of receipts relating to McGeary, which is a business that was divested in June 2024. And so if you strip that out, the customer receipts growth is actually around about 12% year on year. Worth highlighting that the March is is difficult to shift the the the receipts number because the business is is so quiet from a new business perspective in The US in particular in in the December, but also The UK.

So it’s you’re you’re not gonna say the same double digit growth as you’re doing in some other quarters. But also, as we flagged earlier this year, and I’ve talked to a number of investors about that, the business is being slowly moving away from the three year cash upfront deals, which does impact the cash flow profile slightly. So if you go back two years, we’re probably writing around about 15%, a little bit more of our deals in in three year cash upfront business. And and now that’s, you know, you give a month, maybe five to seven percent. And you saw that manifest in the half year report where we talked about the significant financing component and that’s attached directly to that coming down from around $1,400,000 for the half to around $400,000 So they’re probably the main factors at play with the cash receipts.

Operating activities and investing activity cash flows were pretty happy with it. It stayed relatively flat, which we’ll touch on in a bit more detail on the next page. And the other point to note on this page is around that effect sensitivity. We’ve included the same analysis that we put in at thirty one December just to give people a feel for the impact that a movement in the Aussie dollar against The US and pound in particular. That’s the two main currencies that we have for that sensitivity towards.

You do see the numbers come through a lot more in the IRR and there’s a bit of a natural hedge within the business in terms of net cash flow as well. And at the moment, compared to last year, it still remains slightly positive even at that sort of $6.03 $5 So there’s a little bit of a tailwind there without being enormous from a net cash flow perspective. Moving

Tim, CEO: to

Ben, Financial Executive: the next page. A little bit more detail here around the line by line costs. Some of the headline numbers look look bigger, so around staff costs, the increase of 13%. But if you strip that out, the effects impact there out, the increase quarter on quarter is actually around 4%. So it’s in line with 3%, I should say.

So it’s in line with CPI and the pay rises that have come through for the majority of the business were October 1, but for custodial, was January 1. So relatively stable there, which we’re pleased with direct costs. There’s some seasonality in the payment profile there. But again, in line with prior year and stripping FX costs out actually down year on year. And now that a number of those annual upfront payments have moved through the business, I’d actually expect them to be slightly down in the June.

And fixed other, again, there’s a reasonable amount of FX impact in there and some months off handle payments within the quarter. So I’d actually expect fixed up to be down quarter on quarter in the June as well. So costs should be largely flat across the June when compared to March. And as Tim touched on earlier, we should get collect a little bit more cash in the June. It will really depend on the timing of ARR being written, which often does happen later in June.

So the the pipeline will convert to cash most likely in the September, but June is is historically a slightly stronger month than the than the March quarter, I should say. Hardware costs is probably another one that’s worth calling out. There’s been a big effort across the business there to to get efficiency there. So the the the March is a period where we start to purchase a a large amount of hardware in advance of the selling season. So notwithstanding the fact that the business has grown IRR by 25% year on year, we’ve managed to get those hardware costs down 12% year on year, which is a really good outcome.

So that’s been a a big effort across the business to to try and maintain those things. And net interest costs that we’ve talked about previously as well with deploying some of the excess cash that they’ve got into our understanding, the term deposits where we’ve managed to bring the net interest cost down slightly as well. So that’s a very pleasing outcome as well. Next slide, Tim, please. Not not much to add here.

It’s just the usual update around the market cap. So on that note, we can move into questions. Just turning microphones on. Owen, you should be able to unmute now.

Owen, Investor/Analyst: Can you guy can you guys hear me? I think I’m okay. Lovely. Good day, team. Well done.

Forward indicator is very strong. Just a couple of questions. Just to kinda clarify a few things here, some new charts, new analysis. Is the expectations that the ARR from FY twenty four, call it, of a 16 will convert to cash for FY ’25, I. E, a hundred and 16 mil for cash receipts for this year.

And that leads to kind of a fourth quarter number of 28 mil relative to your cash cost of 29 mil. So just to kind of understand the expectations around the cash burn in the fourth quarter, is it like negative one, negative 2 mil? Is that what you’re thinking?

Ben, Financial Executive: Yeah. Probably probably not quite that strong given the move away from the three year cash upfront and also a portion of the IRR is pushing further into the June than than historically. So I expect that The US this year will be, I’d 60%, maybe even more of their new business written in the June, which will be a a peak. So that pushes some of the cash flow into the September. So it’ll probably be a a slightly softer than that, but materially within within touching distance of that.

Owen, Investor/Analyst: Okay. And you haven’t given guidance for f y twenty five. Obviously, lots of moving parts just around ARR. But just just so I can just talk through numbers with you guys. So 19 mil, the weighted pipeline, that’s strong, times that by, call it, 70%, call gives you kind of 13 on a 37 mill.

So the expectation here that it comes in in and around that 50 mill mark, was that was that within within the ballpark, Ben, Tim?

Tim, CEO: Yeah. Look. I mean, the the yeah. That’s why we’re trying to provide those numbers to allow investors to kinda come up with their own conclusions on that. Again, it can be significantly impacted by the last week of of sales and, of course, foreign exchange.

But, yeah, they’re order order magnitude about right. And, look, that will be a 50 if we pull that off, right, it’s 50% increase or 45% increase year on year.

Owen, Investor/Analyst: Yeah. Big numbers. And so the hundred and 50 mil what I’m trying to lead to is a 50 mil of cash receipts then in f y twenty six is kinda what we’re talking about here. That’s what you guys have the analysis you’re providing. In the in that third quarter, the fully loaded cash cost base of your business was 29.

Annualize that to a 20. Is there any the expectation that a 20 will move materially in f y twenty six?

Tim, CEO: You’ve got some variable costs in there, Owen, I think. So your data and hosting costs will will decline a little bit, obviously, the the commissions. But I don’t think it’s materially wrong, Ben. Do wanna add to that?

Ben, Financial Executive: Yeah. Look, I I I think we will maintain the same, I guess, now, look as as we’ve mentioned in the past, which is you have CPI and their staff in the in first half of the year. And so if you if you work on CPI plus a little bit, so, you know, maybe in that sort of four to 5% realm, then I think you’re you’re you’re reasonably comfortable. There’s certainly not a a linear tie between even the variable costs and and revenue increasing. We do get scale benefits, but they the the data and hosting costs will increase.

Owen, Investor/Analyst: And just to kind of as you go through the into the promised land of free cash flow breakeven, as I say, the you talked to there around putting having the capacity to reinvest in the consumer because that’s quite you can scale that with marketing dollars, you could say. What’s the view around your view? Do you think you’ll hold the debt, maybe get a a new facility at some stage in the future, more favorable around the interest rates? Or do you think you’ll you’ll do a debt draw and and or pay that down? What’s the just to understand capital allocation going forward.

Tim, CEO: Look, our our expectation is that we can fund acceleration of the custodial business through gross margin. So without affecting your views or your modeling of cash cash generation into the future. And in terms of the debts, you know, we’re already in discussions with escrow about restructuring that debt. We have the ability, I think, in a year and a half’s time, maybe just just over to with with limited make goods, penalties, let’s say, restructure it. So we’re in this conversation with them about doing that now.

From from the moment, you know, we’re pretty comfortable with our net debt position. But, of course, if we can and we are trying to reduce the interest burden, we’ll do that.

Owen, Investor/Analyst: And then and then last one here, just the the the 25% increase in ARR. How much is price related in that? It sounds like it’s, like, five, six percent’s price and the rest is volume. Is that a good way to think about it? Yeah.

Yep. Okay. Good one, guys. And I guess we’ll be all looking to wait to see the cash receipts cash out with the ARR growth. Right?

Maybe a question for you guys and the market and this the question that gets asked to me. In your view, which quarter I guess it’s a bad way to think about it because it’s seasonal run. But anyway, this Yeah. When that’s gonna play catch up?

Ben, Financial Executive: Yeah. I I I I think I I understand your question. And the main reason it’s not growing at the same rate is that three year catch up front pivot And and to give the people some context, probably don’t understand the the, I guess, benefit to the business of that is when you write a three year cash upfront deal, they’re typically giving away a 10 to 15% discount on ARR. So we’re costing the business ARR, and there’s no need to do that anymore.

But historically, there was actually a push within the market off the back of Trump’s first term. There was a lot of funding. And so the customer was actually looking for it as much as where you were. And there’s still an element of that within the market, so it’s not gonna completely disappear. Our customer our competitors are are offering it, and some of the customers want it.

So there’ll always be an element of of three year cash upfront. And the other point to make around that is we still look to tie all customers into a three year deal. The the majority of our contracts are still three year deals. They just build annually now for the most part rather than a a a portion of them being three year cash upfront. So as that normalizes over the next twelve months, you’ll see the growth in in cash receipts normalize back again with the the growth in ARR, if that makes sense.

Owen, Investor/Analyst: Yep. Yep. And while you’re on that slide, just the last one, I’ve had a few questions. Just in that fourth quarter to f y twenty four, the average sales price per client per annum, is that, like, a forward indicator? What’s that?

You get the fourth quarter?

Ben, Financial Executive: That’s a that’s a heading issue. That should that should be already read q three.

Owen, Investor/Analyst: K.

Ben, Financial Executive: Apologies for that.

Owen, Investor/Analyst: Thanks, guys.

Ross, Investor/Analyst: K. Lindsay, you should be able to unmute now.

Owen, Investor/Analyst: Yes.

Investor/Analyst: Hopefully, I’m here. Can you hear me? Yep.

Investor/Analyst: Yeah. Cool. Thanks. So, guys, couple of questions. Just one tacking on the back of Owen asked and you answered.

The 37 plus a 13 to 14 to $16,000,000, I don’t know what q four is gonna look like, but you’re gonna end something like a hundred and $50,000,000. If I just run spot FX rates through today, that’s like a $4,000,000 headwind versus kind of what you’ve you’ve printed in the March. So just trying to understand, like, the $1.50, is that as of today? Is that if we held everything flat to the March because it just feels like talking to one fifty when you’ve got a $4,000,000 headwind. Might be a bit tough or maybe not.

Maybe you’re still confident with the one Yeah.

Ben, Financial Executive: I mean, UK rates are still pretty consistent. So it’s just The US, and you’re looking at about a a 1.5, 1 point 6 cent variance to the to the right used at thirty one March. So you’re talking maybe $2.02 and a half million dollars worth of headwind, which should still land us around about the numbers that Tim was talking to.

Investor/Analyst: Okay. Very good. And second question is just this move away from the multi year contracts. Like, you’ve called that out, obviously, as being both a detriment for the upfront cash, but then a benefit for the ongoing margin. So could you put a finer point on that?

Because it just feels like this quarter’s cash flows were quite a bit lower than I’d anticipated. I figure, like, a a portion of that is just me mismodeling it, but just just trying to understand how much, like, in as we were kind of environment, cash receipts would have come in. Like, is it a half million dollar impact, a million dollars, a few million bucks in this quarter?

Ben, Financial Executive: Yeah. It it’s more than half a million. I think the the biggest indicator I can point you back to is that million dollars worth of significant financing component difference in the first half of the year. So that’s that’s something that’s, I guess, out there in the public domain. From a cash flow perspective, it would be around about that sort of million, million and a half.

And then the other factor, which is is probably where your expectation differential has come from is is more of the IRR than historically has been the case. It was pushed into that June. So that’s a combination of The UK probably being a little bit softer that Tim touched on earlier. So we’re we’re comping some pretty decent periods in The UK in the December last year and the March year off the back of the Kixie regulations changing. So there was significant growth in The UK then.

And so The UK having gone backwards, it’s it’s actually growing a little bit, but it was comping at a pretty tough period. So that’s probably the other factor there. But, yeah, the you can see it in the pipeline data. The all the numbers that we’ve talked about from a a revenue or cash flow and all those sort of thing coming, but it’s just pushed back a little bit further into the year is is the other pace of the hour. Okay.

Investor/Analyst: Brilliant. And then the flip side of that coin is obviously there is a long term rationale here, right, where this is just driving, like you said, a 10 to 15% or 10 to 15% less discounts on across 10 to 15 of clients. So does does that imply something like going forward a natural kind of couple million dollar tailwind to IRR versus what we’re anticipating previously?

Ben, Financial Executive: Yeah. I mean, question yeah.

Ross, Investor/Analyst: I think I’ve Yeah.

Ben, Financial Executive: The the the question is whether we can get the price increase out of those existing customers that already have the discount into a to a degree, I suspect. Chris, you can probably answer that better than I can. But certainly, for new business that’s getting written, that that discount won’t get it be be offered any any further.

Chris, Revenue Operations Lead: Correct. Yeah. You’re gonna wait until the renewal contract comes up.

Investor/Analyst: Alright. Brilliant. And then just final question. Just on The UK, like, I know you’ve touched on it a little bit, but it doesn’t kinda matter how I think about this. Like, if it’s you you’ve been pretty consistently growing our business 10 to 15% a year.

This quarter was, like, seven. My understanding was also that March is, like, typically the peak selling period in The UK. You’ve added, like, $200 quarter on quarter, so it just feels weak. Like, you’ve given some justification for it, but maybe we could just expand on The UK a little bit more, please.

Tim, CEO: Yeah. Well, I’ll start with it. Yeah. It was the the top line sales, they’re on budget, but it what we would like them to be. We’ve been impacted a little bit by churn.

A big chunk of churn is is the movement of schools out of local authorities providing filtering into so the the way it worked is municipalities would hand over responsibility for connectivity and filtering to these local authorities. And in the last year or two, because of budgetary and, I guess, political reasons, they’re deciding to hand back filtering responsibility to the schools, the council run schools or the multi academy trusts. And so that’s creating opportunity for us to sell individual cells at a high price point, but it looks bad in terms of churn. So the big chunk of that and so, yeah, maybe you can give a bit more color on that, Chris.

Chris, Revenue Operations Lead: Yeah. That that’s part of it. Part of it was just coming off the back of the elections and waiting on the new budgets. That sort of deferred some decision making. Tim, we’ve talked consistently about investing, I guess, in The US in terms of giving that the full expression of our capabilities.

What I see now in The UK is we’re going into this quarter already with, you know, $4,000,000 of pipe and 1 and a half million of weighted pipe. And we introduced CloudScan as a new capability for The UK in March, and that’s already generating half a million dollars of pipe created in months. So and and as we move towards the unification story and getting it tech insights and other things into the UK team’s hands, we’ll start to see them kind of return to, you know, double digit growth, which is where I absolutely expect them to be in FY ’26. So none of this is surprising to us. And as Tim said, the team are doing everything to optimize and build for the future.

And I’m expecting greater contribution from them in the June.

Owen, Investor/Analyst: Yeah. Brilliant. All right.

Investor/Analyst: That’s it for me. Thanks, guys.

Chris, Revenue Operations Lead: Thank you.

Ben, Financial Executive: The next question’s actually through the q and a function. So I’ll just read it out. The The US competitor is trading at eight to 12 times, and we are at 3.3 times. How do you close the gap quick, or do you become someone who is taken over by the other companies in The US?

Tim, CEO: Well, yeah. Like, that’s that’s a risk and that’s, you know, that’s that’s a well trodden path with, I say, tech companies that have got to our scale or if they’re not smaller and have not made it through into indexes and being properly valued. That’s something that is definitely weighing on my mind. Yeah. How do we get the market to to see the business that I see, which is a company that’s growing north of 25% year on year with a well managed cost structure that’s cash generating, that’s profitable, you know, profitable to the tune of 10 to 15%.

Like, we’re rule 40 effectively from January, and we’ll be rule 40 forever. And comparable companies, even less performing companies in the private space in The US are creating it, you know, eight to 12 times multiples. I think it’s just I think the capital markets want us to deliver it multiple times to start paying that paying you that value. Whereas in the private space, they’re willing to take the punt, I guess. So all we can do is keep reiterating that story, that story that I’m gonna explain to you now about where the company’s at, and and and hopefully, we can bring the the market along with us.

Ben, Financial Executive: And why you should be able to unmute now and ask your question?

Investor/Analyst: Ben. Can you hear me?

Ross, Investor/Analyst: Yep. Hey,

Investor/Analyst: Tim. Ben. Crispin. Thank you. My question is just related to The US opportunity going forward.

So we’ve got Texas on the Tasi now, Ohio. Can you talk about just, you know, the size of the opportunity of Ohio relative to Texas? And I guess on a look forward basis, you know, the outlook for The US, which states you think are highest likelihood. And I believe you were in The US a few weeks ago, Tim. So maybe just talking about, I guess, you know, what the sentiment is with Trump and what have you?

Thanks.

Tim, CEO: I mean, I’ll I’ll start because then I’ll let you talk about more specifics and k two. Well, I was in The US mostly well, I went to the USGSV event. Mostly, I was there to speak to the our competitors and the property group. So circling our industry and just kinda get a

Chris, Revenue Operations Lead: read for how they’re thinking.

Tim, CEO: And that was that was really interesting. There is a a view in the private equity world in the in The US that there’ll be a convergence of online safety and real world safety. Obviously, issues around safety in schools, you know, guns being brought to school, hate to protect themselves, tracking students, whole pass systems, alert systems, and so on. It’s a big and growing industry in The US, and there is this overwhelming view actually that the private of the PAs that online safety will also emerge. So I wanted to kinda keep keep abreast to that, how they’re thinking about that, and how they’re thinking about us in that context.

That was interesting. In terms of the Trump thing is nothing’s changed since we put out that release a few weeks ago. There is there was an element there was there was, without question, a move in education to simplify procurement, single threat to choke, you know, single vendors, however you wanna describe it. We’re getting the benefit of that against groups like, you know, it’s kind of specialist providers of classroom management tools or monitoring tools and so on because we’ve got multiple sets of products. And also, EdTechInsights product is aimed at that that procurement, commercial functions on schools are looking for savings, and we can identify them as as well as anybody.

Beyond that, you know, our our industry is funded by local ratepayers, state budgets, and it’s backed by federal legislation. So there’s no direct impact on our business, but we do definitely see some more service spec buying, which I think is an opportunity for us. So Chris, and then and more broadly, Chris, so for you to talk about, you know, where we win and how we win and then Ohio.

Chris, Revenue Operations Lead: Yeah. So the question was in regard regards to which sort of states we we expect to win. We doubled, you know, our penetration in the Texas market through the Tasi relationship in the last twelve months. We will continue to see that growth in in Texas. The parent piece that we have, which is truly unique, is a big part of why, you know, we’re we’re winning those deals into these Texas districts.

And I don’t I expect to see a similar opportunity whilst the smaller states still have 1,800,000 students. Ohio and the same relationship we’ve formed there, I expect us to see a, you know, comparable growth within Ohio. Florida, we’ve got some material opportunities underway with districts well in excess of hundred thousand students. In fact, we’ve got 25 roughly opportunities with student sizes of that range throughout The US. But Florida will be a a large contributor for us this this quarter.

As Tim said, going back to Texas, we’ll continue to see them outperform in the September as well. And then finally, California, just in terms of the size, which is now the fourth largest economy in the world apparently, we’ll continue to see major contributions from the state of California.

Investor/Analyst: Great. Thank you very much. And maybe just one more in terms of on a look forward basis into FY 2026. Sounds like UK, we’re getting excited about the potential growth opportunity over there. US is also very strong.

So just on the relative, I guess, opportunities in in in the two, you know, larger regions, how should we think about it? Which one are you more excited about?

Tim, CEO: Yeah. So when last financial year, added $19,000,000 of ARR. This year, we’ve added effectively that already, and we’ve got the biggest quarter to go. I think I’ve said in the previous quarterly quarterly releases that what we we try and aim for 15% growth in our growth of the prior year. And, you know, that’s we were kind of expecting for this one after year to get somewhere between, you know, ’22 and twenty five million of ARR growth.

I think that’s clearly quite comfortable now. But that’s probably how Christmas is gonna be. You know, he hasn’t yet finalized his budget, but for the twenty sixth financial year, that’s no doubt how we’ll be doing it. They’d be thinking about growth on our prior year growth. So, you know, 15 to 20% growth on maybe 25 to 30,000,000 of ARR growth.

That’s probably how you’d be thinking about it. Look, we can talk more about that in the coming months as we we lock down that budget. Now there is infinite opportunity, right, I mean, you and spoke about this, like The UK monitoring, the parent controls, well-being, The US, you know, running at 2.4 products per customer, and we’ve got five products to sell and more products and modules coming. We’ve got the non English speaking world. We’ve got parent controls.

Like, there’s infinite opportunity for us, but we don’t budget on that about how much could we own of those markets. What we do, and and Chrisman’s team does this brilliantly, is they literally go down to account by account and salesperson by salesperson and give everybody a number. And those that process gives us high confidence, you know, predictability on this person has a million dollar target and most likely gonna get 80% of it and therefore they’re gonna double their wage and and so on. So that’s how we build our budgets and that’s why I I think in these sessions we speak so confidently about our IRR and our pipelines and how all that will turn into cash and profit. So I know it’s probably not the specific answer that you’re looking for, but but honestly, I I feel like there is infinite opportunity, but we kinda run our business much more granular salesperson account manager by account manager type structure.

Investor/Analyst: No. That’s great color. Thanks, Tim. Thanks, Ben. And thanks, Tristan.

Ben, Financial Executive: K. Ross, you should be able to unmute now and ask you a question.

Ross, Investor/Analyst: Thanks. Can you hear me now?

Owen, Investor/Analyst: Yep.

Ross, Investor/Analyst: Yeah. Great. Morning, guys. Just some I guess my two questions have kind of been answered, but I’ll revisit it in some way. Tim, on slide 11, I guess where you’re referring to the average revenue per student and you’re referring to that targeting $10.

Mhmm. Have you put any timeline, I guess, on reaching that? It’s probably tricky bit. I’ll ask nonetheless. And then maybe just revisiting some of those comments you quickly made there about the products or services that will drive it up to that $10.

Tim, CEO: Yeah. Look, it’s it’s it’s a bit of price increases, but it’s mostly about cross sells and upsells. We’ve progressed very, very well in the last couple of years, last year and half in particular, as you can see in those charts. Look, I’ve I’ve been aiming to get there by the twenty seven year whether we can get there or not. I’m not sure.

It look, we’ll know a lot more by the June, to be honest, with all these new products and so also let’s have this conversation in July. As I said, 2.4 products per customer in The US. We’ve got filter class wise, which are most customers have those. We have monitor, which is probably 40% of customers have that. We have pulse.

Very few customers have that. We’ve got the custodial product, but it’s a it’s a free product for schools. We’ll be it’s now creating a benefit, a resident event from outside. We have EdTechInsights, which has only just been launched, and it’s showing unbelievably positive signs. And then AirTechInsights is gonna then morph into more fulsome data analytics products inside the next six to twelve months, which which should offer another kind of $2 plus per student product opportunity.

So, yeah, it’s I think that’s 6 paid for products, plus Chrisman’s got up his sleeve these content aware capabilities, which he sells as modules or added value to the filtering and monitoring products, are another dollar per student per year each as well. So in combination with works there, and we’re at about 2.4. So that’s the key for us at the moment. When I think about my priorities, the first thing is unification, which makes that available capability available everywhere. The second thing is the experience of the go to market to make sure that as many customers can buy those products as possible.

And then I think about the parent control piece, you know, selling through our expanded footprint of parents, and then international, you know, the the problems that we deal with are an international, not an English speaking problem. And so we’ve got a little business in Spain that’s, I think, doubling every year. Has has has done so in last couple of years that will become the kind of partnering and international capability of this business probably from the end of next year going forward. So, yeah, that’s that’s I hope hopefully, that answers your question, Ross. But definitely in the next twelve months, it’s it’s a high focus on unification, all our products available everywhere, and lifting the products per customer.

Ross, Investor/Analyst: That’s very helpful. Thank you. Back on The UK just for a second, I think you’ve and I’ve said this pretty well, but you said the growth of 7% was you’ve acknowledged it’s a little bit softer, you know, you’re also cycling a pretty strong PCP. I was just thinking there might have been a timing issue where, you know, the growth that didn’t happen in UK that you were hoping to is kind of being pushed into the into the fourth quarter. And and that was one of the contributing factors to having a higher weighted pipeline.

But it feels like that’s probably not the case in the way the pipeline is probably far more genuine growth than than a timing issue.

Chris, Revenue Operations Lead: Chris, do wanna go to that? I think it’s a it’s a factor of both, but mostly on the, know, general general growth of the AR pipeline, Ross. So, yeah, we we are definitely through the as I mentioned before, some of the just delays in decision making we saw through the government changes and budget concerns, etcetera, which have now been addressed. We saw some decision making push out, and now we’re actually seeing customers place orders. So I definitely see, like I said, greater contribution from The UK, which this quarter is around 29%.

Last quarter was less in terms of expectation of annual contribution. I definitely expect this quarter to contribute more than what we did this quarter.

Ross, Investor/Analyst: Hey. Great. Thanks. Just a quick one, Tim. I think you mentioned in the past the the Octopus BI.

There’s some cost savings there, just some internal processes that you were automating. You know, saving tens of thousand a month on that. Could you just maybe revisit that if you found anything else? Is that accelerating? Is it still a flat number?

Or maybe some broader comments around how you’re getting efficiencies from that offering?

Tim, CEO: Yeah. So yeah. I think you there’s a whole range of, you know, cost saving opportunities, and one of them is is the potential to increase investment in in engineering in Sri Lanka, which is obviously, you know, somewhat of an offshore type model. We’re building out the the team. We’re building out structures there to make that a possibility, and I’m really excited to see how that’s progressing.

The specific measure that we put in place a couple months ago actually was in our human was in our moderation pipeline. So it’s the the data that we capture from these devices and cloud services and sent to our cloud services for our analysis and some tweaks that we did in there with our data team have have delivered something like $5,060,000 dollars a month of savings. So that’s now starting to come through those numbers. Yeah. There’s ongoing work inside direct costs in our human moderation, you know, making that more efficient and support costs, which nothing was touching on before.

There’s constant work going on including and, of course, you know, product innovation, which is the octopus’ main octopus team’s main role is to accelerate the delivery of of insights into the decision makers and schools. And that that’s the thing that make sure that we are truly sticky and allows us to increase our price points. And I’m most most you know, significantly, I’m so excited about what that team are doing. I think that that the delivery of EdTechInsights inside, like, three months was unbelievable, and the the work that they’re doing on the evolution of our courier platform and what we’ll literally be saying inside the next six six months is is astonishing. So, yeah,

Investor/Analyst: it’s it’s

Tim, CEO: a it’s a brilliant deal for us.

Ross, Investor/Analyst: Okay. Thank you.

Ben, Financial Executive: Thanks, Ross. We’ve got a two pronged question through the q and a channel. First part is, could we please talk through how we view commissions and taxes in relation to ARR versus cash receipts coming through. I think the the main thing to point out there really is the cash receipts and net of reseller commissions. Taxes are they’re separate issue in there.

They just go separately in the in the cash flow statement. We’re obviously have tax losses still available to us, so that is limiting the the amount of taxes paid at the moment. But, yeah, it it is important to note that cash receipts are net of the reseller commission, so you don’t see them in the cash flow statement, but you don’t see them in the p and l. The second part of the question is, how is the sales agreement with the broadband provider in The UK going?

Chris, Revenue Operations Lead: Yeah. It’s I mean, not quite where I hoped it would be in terms of the pipe. We’ve got a few hundred thousand dollars of of opportunities now. Fundamentally, it’s partly due to the same issues that I spoke about before with The UK market, which is sort of almost ready to themselves ready themselves now. The other issue is just they’ve had to evade their people move on.

So we’ve had to then wait and work with the the people that have been moved into the roles, and that’s all now happened. So, yeah, I think it’s been a

Tim, CEO: little bit

Chris, Revenue Operations Lead: frustrating, but, yeah, the you know, looking forward is looking far more, you know, far more optimistic. So I’m hoping that in the future we’ll be able to sort of talk to, you know, more more specifics around closed won opportunities and a larger pipeline that we have with broadband.

Ben, Financial Executive: That’s it for all the questions, Tim. So if you’d like to wrap up.

Tim, CEO: Yeah. Great. Look, that was a long session. Thanks everyone for for attending for all the the great questions. Look, as I said, I think we’ve done a a great job of maintaining cost.

We’ve grown this business at more than 25% over the year. We’ve added 25,000,000 of ARR at twelve months. I think in July when we report the next results, they’ll be even stronger than that, and we’ll be, you know, very fortunately talking about being cash flow generating and and profitable. So, look, we’re at that turning point. You know, hopefully, we will just keep banging the drum as a leadership team.

We’ll keep delivering, and and Ben and I will keep talking to the capital markets, and we’re expecting to see the kind of market center further in the coming months. Okay.

Ross, Investor/Analyst: Thanks, everyone. Thanks, everyone. Thank you.

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