Qoria Ltd

Good morning, everyone, and thanks for joining our December quarterly presentation. And as usual, we'll be going through the presentation and holding questions to the end. Everyone's ability to unmute their microphone is turned off at the moment, but I'll turn that on at the end once we've finished the presentation. So if you raise your hand, I'll be able to do that. You can ask questions through the Q&A function at any time, and we'll again hold those to the end and answer them at the end. and handing over to Tim to take us through the first part of the presentation.

Great. Thanks, Ben, and thanks, everyone, for your time and your interest in Korea. It was a very big quarter for us. There was a record adding $12 million of recurring revenue in the quarter, obviously assisted by the foreign exchange, which has been very helpful, and I don't think there's signs of that going the other way. But let's go through it. So we ended the calendar year with... supporting 25 million kids, 7 million parents, 21,000 schools across 100 countries. On the key financial metrics, we had a 12 million recurring revenue. We ended the year at 132 million of ARR. Our operating cash flow was positive again at 4.2, free cash flow negative 1.1, which is just negative, and over the half we had free cash flow of close to $7 million, which is a good result. $40 million of cash, net debt of 11, minus 11. So we're in a really good position for the back half of the financial year, which is the big selling season for this business. I'll talk more about that in a moment. Pleasingly, all segments are growing above industry. I've spent a lot of time analysing our competitors and our industries, and we're in really good shape in all the markets within which we operate. The Australian market had its biggest ever sales Custodio is a standout and we're still not investing in that business like I'd like to. So as our business margins increase more in Custodio, I think you'll see that growth increase beyond the 21%, which it is having at the moment. US is obviously the key growth engine. That's 31% year-on-year growth in US dollar currency. So that's a fantastic result. So here's the waterfall of our ARR. Obviously, the December quarter isn't the biggest selling period in our education part of our business. It typically is in the consumer part of our business. And so you see that we added about $5 million of ARR growth in the education business and just a touch under $2 million in the consumer business. And then we had FX tailwinds of about $7 million, which combined to end the year with $132 million of ARR. We're very, very comfortable and very happy with those results. Last year, I should say last, so not 24, 23 December quarter, there was a flurry of sales in the UK with the monitor, where there was a kind of statutory obligation on UK schools to monitor students. Now that's kind of returned to a normal sales cycle in the UK. So we didn't see a huge uplift in sales in the December quarter in the UK this year, but we're excited to see what happens. what we've been achieving in the March and June quarters, particularly with the Schools Broadband Partnership, which had really come into its own this quarter. Our SAS metrics, everyone recognises, are pretty outstanding. Our churn is outstanding. If you look on any of the the kind of chat sites that talk about education technology in the US, you'll see always glowing comments about our deployment and after sales service. Our service margins are high, our net retention, it's not a great net retention period for us the December quarter because we don't get many opportunities because it's not the key selling period. but 105% net retention period. Of that calendar year, I'm very comfortable with. ARR growth at 26%. Marketing efficiency for every $1 of marketing we spend, we get $9 of revenue, contracted revenue. These are outstanding stats. And the last one is obviously a key. We really don't have any bad debt, so it's a very, very sound book. Another one that's important is that we convert our ARR to cash very, very reliably, and we'll see that in the charter show in a minute. So cash collections, you can see here the cycles where cash is mostly collected in the September and December quarters and then it kind of tails off. But you'll also see clearly in this graph this kind of step change in our business as we're selling to more and more and bigger and bigger school districts and selling more and more products. And there's one measure about the more and more products I want to show you in a moment. So operating cash flow, which is the standard accounting measure of that, we've been positive now for, this is our third positive operating cash flow ever, and second in a row. And now let's quickly turn into the K12 highlight. So the charter one's the highlight, it's the one on the bottom right, which shows our average revenue per student, it's essentially our average licence fee, and that's creeping close to the $8. People would have heard me talking over the last year or two about trying to target a $10 of ARR per student. In the medium term, I think we're really in a good shape to get it there. A combination of... you know obviously the price increases by customers becoming more comfortable with who we are in the markets that we operate um but also these additional products that we now have access to which are really starting to make a dent in our average license fees and actually i'm pleased to talk about some of those new products at the end of this session which are mostly ai driven and in almost almost all cases kind of put us ahead of the market in the way the market thinks about filtering in particular. So the education business ended at about $105 million of ARR, so broke through $100 million, which is a huge milestone. Unpleasantly, ARR in the US came from these new AI-based products that were only recently introduced, so that's very exciting. As I said, Australia achieved 515,000 net growth, which is easily a record. And that, again, shows that we want to, I guess, to explain that the Australian business has gone through a restructure over the last couple of years of kind of really trying to change the model to how we talk to customers and deploy our technology in the US. Really now showing strong signs, in particular the custodial, the ability to offer parents in Australian schools the credit control products is really starting to drive business to us. So that is another great reason for that custodial move We enter the third quarter with a record of $32 million of deals in our pipeline. That excludes some kind of, to call them whale-type opportunities we have out there with some state and country-based deals. That's, you know, bread and butter business. We've got $32 million in the pipe, $11 million in the weighted value. So we're reasonably confident that we'll add at least $11 million of ARR in the education business in this half. Last year, if I recall, we added something like $14 million of ARR in the second half of the financial year. So we feel like we're in a really good position. Consumer business is just doing brilliantly. ARR's top $25 million is getting close to $26 million. The average revenue per account continues to climb. The promotion of Custodio through our US school clients is continuing to achieve all of our aims. We're getting more and more districts willing to promote that deal. We're getting typically 20% of parents in the school district signing up to the Custodio freemium product. And whilst it's not a huge – it's not our kind of focus right now, we're getting and encouraging 1% of those parents upgrading to the paid product. We've got in the pipeline access to about 1.4 million students of school districts in the US that are in this calendar year hoping to start launching and talking to parents about Custodio. So the overall Custodio proposition is doing brilliantly. It's core business selling direct is exceeding our expectations, going north of 21% per year. It's selling it through our schools. We're hitting all the numbers that we'd like to achieve. And then, as importantly, we're now getting schools coming to us because they can extend their school capability to parents through the Custodio product. So that's doing very, very well for us. So what's next? The March quarter is seasonally the key selling period in the UK. That is probably going to extend through to June. BET, which is the key edutech conference in the UK, is happening literally this week. FETC was really the launch of the education conference season in the US, and that was last week. And I was really pleased with our presence in the stand there and really pleased to see the excitement around the AI capability that we're now adding to our products. So as I said, we're set up in a really good place. In fact, this is literally the words of Harrison Parker, our US VP. He said, we've never been in a better position for the key selling period in the US, which is the June quarter. because we have very, very good products, a very good reputation and a whole range of new add-ons and new modules that we can talk to customers about. Again, I'll talk about those in a moment. The Stereo March quarter isn't a particularly high-value retail period for us, but we do have the exciting SoftBank partnership, which we're hoping to bring to the market this quarter. If not, it will be April. But that's a very, very exciting opportunity for us and hopefully a harvester of things to come. And then financially, as everyone knows, the December half for us is the key cash collection period. We collect something like 40, 45% of our cash in the second half. We're still expecting to be EBITDA, reported EBITDA positive for the year at somewhere between 10 and 15%. So free cash flow on or around about break even for the year, reporting EBITDA profitability for the year, We're very excited about that and we'll be talking about kind of half-year results. We'll be talking about EBITDA profitability and the half-year results which will come out shortly. Okay. I haven't done this before. I just want to switch gears and introduce The market, the hard work that we've been doing in innovation, we've bought the octopus business, which is a whole, which is the data and AI capability. We've also been working internally on AI tools for some time. And I thought it's worthwhile just to present to our investors some of the fruits of that effort. Okay, we launched recently an AI-enhanced categorisation. Categorisation is when you analyse websites and you categorise them. There are third-party services that do that, that we use, and I'll say that particular URL, like Pornhub is porn, or this particular website contains hate speech or, you know, viruses or whatever. And that is the historical and the sort of sound way to classify websites by analysing the text. But what we've added now is the ability to scan web pages for images and then add contextualisation categorisation to them. But it's really a breakthrough. It allows us to classify image-heavy websites and international websites, Russian websites, websites in all sorts of different languages, and provide a much more, as we say here, unparalleled level of protection. That is a real innovation that's making a real impact in schools. We've also launched this product, we launched it actually late last year and I think we're probably north of $500,000 of ARR from this product already. This is allowing schools to enable age-level obfuscation of images. Now, the use case here is, because people are probably familiar, that Google Search and Edge Search allows you to hide images, but what kids are doing to bypass that stuff is they're sharing pornography via, you know, self-created websites or other platforms where there isn't safe searching type functionality. So with our AI capability now inside the browser, we can actually look at images before the child does and obscure them real time. It is an outstanding service and it's a major turning point in our business going from essentially a blunt block and allow to an approach where we want to open up the internet to kids but make sure that the experience can be managed, can essentially create an age-appropriate experience. We're adding video blurring right now. In fact, that's in beta right now, and that will be being sold in the US in the next few months. So again, in the page, as the page is loading, we can check out the images and the videos, and we could obscure anything relating to pornography, guns, gore, child sexual abuse material. It is an outstanding innovation. is an extension to our digital monitoring product, so we can now log into the kids' O365 and Google Workspace accounts, log into their docs, their drives, soon to be their emails and chats, and have a look at what they're doing in cloud services. Our monitoring technology today is all on device, and now we can, and this is in beta now, we can scan what the kids are doing in the cloud, And also look at what's called B-party conversations. So we can also look at what kids are receiving from third parties, including text. And that allows us, again, to provide an unparalleled level of safeguarding for kids. So we have awareness of what they're doing on the device. We have awareness of what they're doing in the cloud. And we can bring all of that capability to bear to protect these kids, these very vulnerable kids. AI-enhanced moderation. So we capture something like 400 million bits of text and images a month. 400 million. It's extraordinary. And of that 400 million, about 100,000 get sent to our human moderators every single day. And they escalate something like 1,000 to 1,100 per day to school safety ladies and police. Now that's a huge task, and as that part of our business, which has gone from 5 million to 35 million in the last couple of years, as that business continues to grow, we need to make sure it's scalable, but also we need to protect our human moderators who are seeing some very nasty content. So we've introduced AI into that whole cycle in a number of places. Pleasingly, we've reduced the number of captures that we have to handle by about 30%, which is offering very substantial cost savings in just human moderation. we will soon be able to automatically moderate child sexual abuse material to save our team having to see that material, And we're also introducing innovations in the way that we process these captures, which is expected to save us an order of a million dollars in process cost this calendar year. And there's a heap more to come. So there'll be a constant stream of work in our business to add value from costs and to our customers and absolutely save more lives in this moderation. Okay, in our Custodio product, we're using similar sorts of tools now to look at what kids are doing on their devices and in their cloud platforms like Instagram and, you know, the Japanese Line social media product and so on. We can scan what kids are doing in there. We can scan what the kids are typing in their Google searches, and we can let parents know that there is something in here that you need to pay attention to. It's called Behavioural Alerts, and it was launched late last year with a search term alerting. It's now social media alerting. WhatsApp alerting has just launched, and that will be definitely a theme in the coming 12 months in the custodial product. And I think one more piece, there's a lot of AI work going on in this business, is enhancing our support processes to deal, I guess, the kind of bread and butter queries which we always receive and automate those. and then really get our outstanding service team to focus on the high-value and more complicated escalations from customers. So we launched an AR-based chatbot in our K12 business in the US that's soon coming to Custodio and to our UK business. It's anticipated to generate about $1 million worth of hard savings, so people savings in this business within 12 months of the implementation. So that's live now and is making real impact on customer support. Okay, so I think that is it for me. I'll hand over to Ben.

Thanks, Jim. I'll just touch on a couple of quick points for the quarter on the financials. I think a lot of it's fairly self-explanatory. The results in line with our expectations of a... A small burn in the quarter. As a reminder, Tim touched on, the December quarter is seasonally lower than the September quarter. It is our second highest cash collection quarter, though, and we'd expect March to be slightly lower again, and then the June quarter is somewhere in between. So the bulk of our cash collections do come in the September quarter, and we collected that cash reasonably well, so there wasn't really much hangover from the September quarter into December. One thing that is worth pointing out, and again Tim touched on it briefly at the start, is the business is a net beneficiary of a weakening Australian dollar against the US in particular, to a lesser extent the pound as well. We've done a little bit of sensitivity analysis at this point in time, obviously as the business matures and the US dollar becomes a greater proportion of revenue over time. These numbers will change. But right now, based on the size of the business, that's roughly the benefit that the business gets for every cent in decline of the Australian dollar versus the US dollar or the pound. And you see that flesh out in the $7 million worth of benefit in ARR, but that actually translates into real benefit from an EBITDA and cash flow perspective as well.