Skillcast Group plc

Good afternoon and welcome to the Skillcast Group plc H1 2026 results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and they can be submitted at any time using the Q&A tab situated on the right hand corner of your screen. Simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to CFO Richard Steely. Good afternoon.

Thanks for the introduction and good afternoon everybody and thank you for joining and expressing interest in Skillcast. I look forward to giving an introduction and update on our business. So I'm joined by our CEO Vivek who will be here to help and answer questions at the end but I'm going to be running through as CFO the major part of the presentation today. So here are financial highlights for the six months ending the 30th of June 2026. We're pleased to show another period of double digit revenue growth. Our subscription revenues lifted 15% on the same period last year to 7.4 million. Total revenues were up to 8.2 million and our total revenue growth was 10%. Our ARR annualised recurring revenue was up 14% to 14.5 million. 90% of our revenues are now recurring revenue. Our gross margins lifted 1.6% to 77.7% and our EBITDA grew 48% to 1.0 million and a margin of 12% from 9% last year. We continue to build our cash reserves going up to 13.6 million of net cash and no debt as of the 30th of June 2026, 2.1 million more than last year and increased our free cash flow by £700,000 in the period. We increased our dividend as per our policy in line with subscription growth by 15% to 0.232 pence per share. and our rule of 40, the SAS metrics that looks at adding the ARR growth and the EBITDA margin together was 26% for the period, 6% below the H1 last year due to lower ARR growth. Thank you. Sorry, just gone. sorry i i can't actually see how i can move the slides at the moment thank you that's not so in terms of our h126 arr breakdown as i said just now we grew that by 14.40 to 14.5 million our total client numbers excluding the smaller clients distort the metrics on our self-serve core compliance platform grew six percent to twelve hundred and fifty Our average ARR per client also increased by 7% to just over £11,400 and our net retention remained at 100% in line with last year. The variables, the factors within the net retention were we had 5% price rises that most customers accepted within the period compared to 3% last year. We did have slightly higher churn of 9% rather than 7% the year before. While slightly disappointing, there's no one factor that's particularly driving this and it's nothing that's causing management any undue concern. Net retention is also supported by our product upsells and the graph on the right shows that our non-standard plans, so our enhanced plan, our premium plan and our core compliance plans increased their representation of total sales by total ARR by 77% 78% so up to 50% of total ARR and we believe there's still a long way to go on this upside trajectory I just now want to talk about some of the strategic and operational progress we've made during the period Our major focus and something we're very proud and excited about is how we've developed our products, which have all been developed in-house over the last 25 years with the adoption of AI. So just to remind you all in 2025, we launched our first AI product and that was called Ask Ada. Ada is our sort of generic sort of username for any of our AI products within our courses and technology. and we launched that as a compliance assistant that provides instant access to trusted compliance guidance within the product so any training course you're doing or any of our RegTech tools you're looking at there is a ability to ask a chat assistant any questions on any of the content or anything about the course or tools that you want and get an instant response Just after the end of the half, we launched in July our next tool, which is called Edit with Ada. Now this is a tool that enables our clients to effortlessly customise our trusted compliance courses and minutes. And we're really excited that within two months of launching by the end of September, 15% of all clients were using this tool and had used this tool. So we feel this is a really exciting tool to support our business and explain the rationale why clients should carry on using a proven trusted provider to supply their compliance needs. And later this year, we're going to launch our next product, which is called Learn with Ada. This is a conversational learning tool. So it's taking these with the Ask Ada assistant and making it much more interactive. So the AI tool within the courses will ask the learner questions about the course and make those questions specific to how the interaction with that learner is going. to help them build understanding and confidence in a controlled environment. It would also enable greater knowledge retention of the courses. In later this year, we're also going to launch translate with Ada, which is an AI tool within any courses. So you can the compliance manager or the L&D manager is able to translate any of our courses into any other language using AI. On the roadmap for next year, we're excited to launch Create with Ada, and this is taking our AI Edit with Ada to the next level, where rather than editing an existing course, it will let you build courses from scratch using secure sources. So all of this, all of our AI, I have to remind everyone, is within a secure environment. It can only look at documents and sources of information that you choose. We also hope to build on our extensive dashboard reporting with some AI analytics and insights to support learners and managers. As well as adoption and development of our AI products, we've maintained and excelled with our customer service. Every client in our organization has a dedicated human customer support representative. They still do use AI to enhance their productivity, but we know one of our USPs is the fact that there is always a human being that can talk to any clients if need be on any issues they might have. We effectively kept our headcount the same, 1% more than last year and this is something we feel we can continue doing in the near future. We've seen productivity gains not only as we've developed AI in our products, we've also and developed AI tools within our organization to enhance our productivity. Both which is enhanced both our cost of sales on our on our on our overheads to increase at a slower rate than our sales, thus improving our margins. And we're excited that we're at the progress we're making on multiple acquisition opportunities as the main use of our surplus cash. slide thank you so just looking at the income statement as you can see subscriptions revenues drove all of the revenue growth up 15% to 7.4 million we've saw a reduction of professional services our non-strategic professional services revenues fell 22% and they'd fallen 7% on the year before This is not a complete surprise to us in the current market, in the current world of AI. There are still some people that want to spend lots of money on people like us to actually write bespoke courses from scratch, but it's understandably reducing and is something we expect will probably continue to plateau. So total revenues are up to 8.2 million 10% growth on the year. As stated our gross margin increased by 1.6 percentage points and this is a factor due to our subscription revenues now representing 90% of all revenues which are at a higher margin plus we've also actually increased the margin within the subscription business too as well. Our overheads increased by 7% to 5.3 million and our average headcount increased 3% behind that. That led to an EBITDA of just under a million pounds or 48% up on the year. on that basis. As we know, we always pay dividends and we said a few years ago that we're going to increase our dividends every year in line with a subscription revenue growth. So we are proposing to pay in October an interim dividend of 15% higher last year than last year of 0.232 pence per share. We retain and continue to grow our balance sheet. It's a fairly straightforward balance sheet. Our non-current assets increased from 0.6 million at this time last year to 1.1 million as we've recognised the renewal of our London office lease. Just to remind everybody, we don't capitalise any of our product and tech development. It's always all expense purely for simplicity. And that would have equated to about 0.7 million in the period. Our receivables, including trade creditors, were 2.8 million. 4% above 30th of June last year due to higher revenue growth supported by auto renewal terms. Debtor days increased marginally from 52 to 54. 0.2 million receivables relates to Maltese withholding tax which was paid just after the half in July. So net cash overall has increased to 13.6 million, 2.1 million up on the same time last year. and just to remind we have no bank debt in the business. Trade credits and other payables were 0.3 million lower than this time last year, partly due to the correction and repayment of a VAT payment from HMRC. Deferred income at the 30th of June was up 11% from the same period last year, driven by 10% higher annual SAS subscriptions and 27% higher professional services. deferred income at the 30th of June was materially the same as at the 31st of December 2025 due to £200,000 worth of uninvoiced contracts renewals and £0.3 million of overages not being reflected in deferred income at the balance sheet date. In terms of cash flow, apologies, There we go. So it's a bit of a delay on the slides. Apologies. There you go. In terms of the cash flow, we generated £700,000 of free cash flow in the period. This came as we've generated £300,000 more PBT, but we've seen more of that big oath to be tied up in working capital in the same period last year part of that was the half a million pounds worth of historic Maltese tax settlement received in H125 0.8 million was due to a lower increase in deferred revenue partly due to slower ARR growth than H126 and H125 but also due to a higher amount of unenvoiced renewals and overages and also partly due to a VAT correction received in H225 In terms of our strategy, just to remind everybody of our strategy, our strategies continue to grow our ARR by 15 to 20% per annum, primarily through a combination of new logos and upsell, supplemented by content acquisitions and with continued operational gearing to consistently achieve the rule of 40 in the medium term. We're going to continue to grow our new ARR to attract new logos both in the FS sector and other sectors, increase our presence and continue to develop our market around self-serve and core compliance and expand into other markets. We will maintain our net retention of at least 100% and continue to expand our ARR from upsells to enhanced and premium We continue as we've just evidence to innovate our product and strengthen the differentiation by developing agentic Ai and non Ai tools to simplify compliance for all our clients. We will maintain a PS presence or continue to expect that non-strategic area not to continue to grow. But we will continue to develop operational gearing benefits to further strengthen our EBITDA margin and will continue to invest in technology and own and third party to drive further productivity improvements in product development, customer support and commercial administration areas. will maintain a strong balance sheet and optionality to support primarily M&A and we continue to seek and have made progress we believe in looking for acquisitions in the digital compliance trading sector that could leverage our technology platform and operational infrastructure and provide cross-sell opportunities. Our business model is to digitize, automate and consolidate compliance and make it simpler for organizations. We believe we operate in a large and resilient market with demand growing as companies seek to streamline and automate staff compliance. and we believe that we have a high drop-through rate of incremental ARR through to EBITDA. We offer extensive content and GRC tools and four subscription plans. We have market-leading client support with in-house content and technology. We have an established infrastructure and headcount in place to support growth. And we have AI and non-AI technology embracing culture to maximize our productivity to support all that. In terms of current trading and outlook, we see and are confident the GRC market remains strong. We've had a very encouraging early reaction from our adoption of Edit with Ada which was launched in July with a 15% client take-up as already mentioned. We're excited about launching Learn with Ada this half and we expect ARR and H2 to grow at similar levels to H126 in absolute terms, but that will have a slight impact on the year on year growth rate due to a stronger growth on H2 last year. Professional services, we will continue to serve as and when there is an incoming need, but we do have limited visibility of that. And we expect our EBITDA continues to grow and benefit from operational gearing and enhance productivity from AI. And we continue to expect four year revenue and profit to be in line with expectations. So thank you for listening. And I think we are now hand back and we'll open the floor to questions.

That's great, Richard. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that recording of this presentation, along with a copy of the slides and the published Q&A can be accessed via our invested dashboard. Richard, Vivek, if I may now hum back to you to take us through the questions and I'll pick up from you both at the end. Thank you.