Qoria Ltd

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 FY20-25. 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 turn over to questions. So as usual, you can ask questions through the Q&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. Great. Thanks, Ben. Thanks, everybody, for joining.

Hopefully everyone can hear me. So we also have Crispin Swan here who runs our revenue operations for K12, part of our business. So he's available for any questions you may have as well. But look, in summary, it was a pretty solid quarter, actually, and really the focus of the March quarter. given that it's not the biggest selling period in our K-12 business or the consumer business that's really about to close up for the key selling periods of June and into July, August. And without question, we in particular Christmas team did that fabulously 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 million kids and 7 million parents using our products every day, and that's pretty substantial growth. But what you'll see here is our financial growth is even stronger still. Our ARR is growing. I think we've added $25 million of recurring revenue in the last 12 months organically, which is an amazing result, more than 25% year-on-year growth. So we've added $18 million in this financial year to date, coming into the biggest selling period. I'll talk more about that in a moment. Ended the quarter with $137 million of ARR. Our balance sheet's in a great position with net debt of just over $22 million. Operating cash flow, massive surplus so far this year of nearly $20 million and less than half a million dollars for the financial year to date. So we're delivering very, very strong top line growth, maintaining our costs structure really well, improving our gross margins really well, and most importantly, setting ourselves up for the killer end of the financial year. um here's the arr of the last quarter in uh waterfall and you see the both parts of our business the consumer and k12 business group gross revenue really well we were impacted by a little bit of um positive effects movement and of course as any enterprise business does you have a bit of churn but over overall added five million dollars per quarter which is on on target and as i said 25 year-on-year growth Again, coming into, I'll keep highlighting this, coming into the biggest quarter that we have every year, and I'd expect to substantially improve that year-on-year growth through the family. As you can see on the regional splits, the US is obviously the huge market, the standout market, I think, where... We're becoming, if not already, being seen as the leader in that market where we're starting to dominate 30% year-on-year growth in a very mature market is amazing. Custodio, I think that understates the performance of the custodio business. I think you'll see, certainly in the back half of this calendar year, very swift acceleration of that business is doing brilliantly well. ANZ is, again, I've touched on this a couple of quarters, a highlight, a standout 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 you see, 33% year-on-year growth, is pretty good. The UK, I think the UK teams should be applauded for what they're doing there. We don't yet have all of our product developed in that market. That's some content-aware filtering, classroom management, and some data analytics tools. That's coming, the cavalry will soon arrive. So we're expecting the 26th 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 um yeah this this is a new chart we've put in and really the purpose of here is to highlight uh how strong and reliable our business is. What you're seeing here is a chart showing the weighted value of our K12 pipeline over the last three years, split by quarter, in comparison as to how much of that pipeline is then converted into actual gross ARR or contracted ARR in the next quarter. And you see with a band that there is a reliability, a very much predictability in the numbers that we provide to the market in terms of pipeline and then the dollars that it turns to in exit ARR in the subsequent quarter. Now, the quarter three is the quarter that we're in at the moment, also that we just reported on. Our baseline pipeline was nearly $20 million. Our unweighted pipeline was over $43 million. 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%, 75% of that pipeline. Now, timings are always hard to predict within a tolerance, but 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 quarter, 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 end of August, early September, So yeah, we're set up in an amazing position and the pipeline's still growing, I might add. So incredible, incredible result. These SaaS 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 twelve 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 july and um hopefully we can all see some appreciation in this um in this this valuation Another new chart that we decided to put in this quarter, because I think, again, it speaks to the reliability of this business, that we're an ARR business. And what I think the market doesn't understand is how visible our business is. So we have, for instance, in the US, we have access to, for the most part, details on what all of our potential clients, all school districts, who their providers are, what they're paying. the kind of general contract terms and we can there load that into our crm and then we can allocate those opportunities across ourselves 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 end of march was 137 million dollars 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, very predictable. So I think within, again, on subject to FX movements, I think investors could probably have confidence that from 1 April, through the 31 March next year, we should be collecting more than $130. Remember, that figure is net of reseller commissions, and reseller commissions go through 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 12 months. So we have turned that corner again. This is highlighting how predictable this business is and that inflation point. This is looking at our cash flow, and again, adding another piece of insight, 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. you can see on average in the march quarter we're collecting around about 20 and that's the reason why we we burned cash in march burned less cash cash in june but that's 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 our low point so totally to be expected that this business burned a bit of cash in in the march quarter That will be less in the June quarter, and then this business will never burn cash in our modelling from 1 July onwards. Okay, Crispin's on the line, but look, I'll speak on his behalf, but feel free to ask questions if you'd like. But the K-12 part of our business 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 churn and, you know, renewals and products per customer and average revenue per student and average sales price. They're all going the right way. But what we're also seeing at the coalface is outstanding MPS scores and customer satisfaction scores and even things like the ability of our team to respond to customer service requests inside 30 seconds. We're way ahead of everybody in the market in terms of our ability to understand customer needs deliver products to them understand expectations so all of our kind of leading metrics are going the right way and as a consequence you're seeing what you see here which our 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 100,000 students are now regularly interacting with our business. But whilst doing that, we are also increasing the price points of the 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 excited 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 per sell, the cross-selling, the net revenue retention figure will be 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've launched the EdTech Insights and CloudScan products, which we promised last quarter. And they've now generated more than $3 million of pipeline that I just spoke about then. We've already announced this, but we were recently appointed as the preferred provider in Ohio, which is a very significant state, 1.8 million 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 TASI, an organization called TASI, 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 Western Australia combined. That's the scale that we can now sell into, which is super exciting. All right, so a couple of highlights. I'll just touch on it then. TASI is the Technology Alliance for Statewide Initiatives. It's essentially a 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 wellbeing 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. There's 5.84 million students. It's 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 empowering 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 belief 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 on the team.

Yeah, thank you, Tim. So what this talks to is 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 they're... their sort of MO in life is to invest in projects that deliver good to, you know, to families. And what we've done collectively is work with the trust to fund Pulse, which is the student checking tool for a large number of schools within the West Auckland purview of that trust. And really that just opens up the opportunity for students that are looking at 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 uh localization with uh tamari the local language so that it's 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 trust 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 um worthwhile investment of their resources so yeah a lot more to come out of this and i'd love to see this uh replicated in other regions in the future as well

Yeah, look, what I love about this is we're now working with a very substantial community with underprivileged and disaffected kids in New Zealand. And we can now be able to demonstrate the efficacy of these tools, working with these communities, working with these schools. And everyone knows I'm a massive fan for the well-being aspects of our business. I think mental health for youth is a huge problem in our CL business. pushing further into there. And I think this now will provide an evidence base for us to do that more aggressively globally. It's very exciting stuff. Okay, our consumer business, look, I keep mentioning it is just so well run and it's in such a good spot. One key highlight for us, we've been diving deep into the cost structure of that business and we're now generating literally 360% return on investments for every $1 of marketing in the consumer business. We're adding about $4 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 maintaining our financial disciplines and promises. But that is an outstanding business. All the metrics are going the right way. In particular, churn is incredibly well managed. Annual recurring revenue is growing around 20% per year. 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 resonant benefit because we've got you know soon to be 20 of us schools talking about printer controls and our approach to printer controls so that's the game there and um yeah really well positioned i think really well positioned that will become a big growth story for us the next few years and look we also highlight there in the call out that softbank have now launched custodio through bss which is their subsidiary so softbank is now available through the sorry custodio 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 won't go into much detail there because 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 think about or look at for the next few months? Clearly it's K-12, June quarter, September quarter, there'll be significant growth. Last year, as an example, We added $9 million of recurring revenue across the business in the June quarter. An extrapolation of our conversion numbers from the slides I saw before, we put that somewhere between 14 to 16. So we're hoping to deliver a very, very strong quarter. And again, there's more to come in the August quarter, September quarter with Texas. We should collect a little bit more money than The March quarter, so if you think about our cash collections profile, the main cash collection period, as we highlighted in the previous slide, is that September quarter. So certainly for this calendar year, expecting to be significantly cash flow positive. And for this financial year that we're in, we're expecting to be materially EBITDA positive, still forecasting somewhere between 10% and 15% EBITDA margins for this current financial year. All right, hopefully that was a decent summary. In 20 minutes, I'll hand over to Ben.

Thanks, Tim. So a couple of highlights from this slide. Something to point out around the March quarter 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 quarter is difficult to shift the receipts number because the business is so quiet from a new business perspective in the US in particular in the December quarter, but also the UK. So you're not going to see the same double digit growth growth as you do 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 has been slowly moving away from the three cash upfront deals which does impact the cash flow profile slightly so if you go back two years, we were probably riding around about 15%, a little bit more of our deals in three-year cash upfront business. And now that's in any given month, maybe 5% to 7%. And you saw that manifest in the half-year report where we talked about the significant financing component. That's attached directly to that coming down from about $1.4 million 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, we're pretty happy with. They've 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 FX sensitivity. We've included the same analysis that we put in 31 December just to give people a feel for the impact that a movement in the Aussie dollar against the US and the pound in particular. Those are the two main currencies that we have that sensitivity towards. You do see the numbers come through a lot more in the ARR 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 63 and a half cents. So there's a little bit of a tailwind there without being enormous from a net cash flow perspective. Moving to the next page. Little bit more detail here around the line-by-line costs. Some of the headline numbers look bigger, so around staff costs, the increase is 13%, but if you strip that out, the FX 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 1st of October, but for custodial it was 1st of January. 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 quarter. And fixed other, again, there's a reasonable amount of FX impact in there and some months off annual payments within the quarter. So I'd actually expect fixed other to be down quarter on quarter in the June quarter as well. Costs should be largely flat across the June quarter when compared to March, and as Tim touched on earlier, we should collect a little bit more cash in the June quarter. It will really depend on the timing of ARR being written, which often does happen later in June, so the pipeline will convert to cash most likely in the September quarter, but June is historically a slightly stronger month than the March quarter, or quarter, I should say. Hardware costs, there's probably another one that's worth calling out. There's been a big effort across the business there to get efficiency there. So the March quarter is a period where we start to purchase a large amount of hardware in advance of the selling season. So notwithstanding the fact that the business has grown ARR managed to get those hardware costs down 12% year on year, which is a really good outcome. So that's been a big effort across the business 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 high interest term deposits, we've managed to bring the net interest costs down slightly as well. So that's a very pleasing outcome as well. Next slide, Tim, please. 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.

Can you guys hear me? I think I'm on. G'day, team. Well done. Forward indicator's very strong. Just a couple of questions. Just to kind of clarify a few things here, some new charts, new analysis. Is the expectations that the ARR from FY24, call it 116, will convert to cash for FY25, i.e. 116 mil for cash receipts for this year? And that leads to kind of a fourth quarter number of 28 mil relative to your cash costs 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 two mil? Is that what you're thinking?

Yeah, probably not quite that strong given the move away from the three-year cash up front and also a portion of the ARRs pushing further into the June quarter than historically. So I expect that the US this year will be, I'd say 60%, maybe even more, of their new business written in the June quarter, which will be a peak. So that pushes some of the cash flow into the September quarter. So it'll probably be slightly softer than that, but materially within touching distance of that. Okay.

And you haven't given guidance for FY25. Obviously, lots of moving parts throughout ARR. But 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% gives you kind of 13 on 137 mil. So there's the expectation here that it comes in and around that 150 mil mark. Was that within the ballpark, Ben and Tim?

Yeah, that's why we're trying to provide those numbers to allow investors to kind of come up with their own conclusions on that. Again, it can be significantly impacted by the last week of sales and, of course, foreign exchange. But, yeah, they're all in order of magnitude about right. And, look, that would be a 50 – if we pull that off right, it's a 50% increase or 45% increase here and here.

Yeah, big numbers. And so the 150 – what I'm trying to lead to is 150 mil – of cash receipts then in FY26 is kind of what we're talking about here. That's what you guys, the analysis you're providing. In that third quarter, the fully loaded cash cost base of your business was 29. Annualize that to 120. Is there any, the expectation that 120 will move materially in FY26?

You've got some variable costs in there, Owen, I think. So your data and hosting costs will climb a little bit, obviously, the commissions. But I don't think it's materially wrong, Ben, to add to that.

Yeah, look, I think we will maintain the same, I guess, our look as we've mentioned in the past, which is you'll have CPI in there for staff in the first half of the year. And so if you work on CPI plus a little bit, so maybe in that sort of 4% to 5% realm, then I think you're reasonably comfortable. There's certainly not a linear tie between even the variable costs and revenue increasing. We do get scale benefits, but the data and hosting costs will increase.

And just to kind of, as you go through the, into the promised land of free cash flow break even, as I say, the talk 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 new facility at some stage in the future, more favorable around the interest rates? Or do you think you'll hold that facility in place? Or do you think you'll do a debt draw and pay that down? What's the, just understand capital allocation going forward?

Look, our expectation is that we can fund acceleration of the custodial business through gross margin, so without affecting your views or your modelling of cash generation into the future. And in terms of the debt, 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 over, with limited make goods penalties, let's say, restructure it. So we're in conversation with them about doing that now. For 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.

And then the last one here, just the 25% increase in ARR. How much is price related in that? It sounds like it's like 5%, 6% price and the rest is volume. Is that a good way to think about it? Yeah. Okay. Good one, guys. And I guess we're all looking to wait to see the cash receipts cash out with the ARR growth, right? Maybe a question for you guys and Mark and the questions that get asked of me. In your view, which quarter? I guess that's a bad way to think about it because it's a seasonal run. But anyway, just when that's going to play catch up.

Yeah, I think I understand your question. And the main reason it's not growing at the same rate is that three-year cash upfront pivot that we're talking about. And to give people some context that probably don't understand the, I guess, benefit to the business of that is when you write a three-year cash upfront deal, you'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 we were. And there's still an element of that within the market. So it's not going to completely disappear. Our competitors are offering it and some of the customers want it. There'll always be an element of three-year cash up front. And the other point to make around that is we still look to tie all customers into a three-year deal. The majority of our contracts are still three-year deals. They're just billed annually now for the most part rather than a portion of them being three-year cash up front. So as that normalises over the next 12 months, you'll see the growth in cash receipts normalise back again with the growth in ARR, if that makes sense. Yep.

Yeah. And while you're on that slide, just the last one, I've had a few questions. Just in that fourth quarter, FY24, the average sales price per client per annum, is that like a forward indicator? What's that? You've got the fourth quarter.

That's a heading issue. That should read Q3. Okay. Thanks, guys.

Okay, Lindsay, you should be able to unmute now.

uh yes hopefully you can hear me yep yeah cool thanks um so guys a couple of questions just one um tacking on the back of owen asked and you answered um the 137 ar plus a 13 to 14 to 16 million i don't know what q4 is going to look like but you're going to win something like 150 million dollars um if i just run spot fx rates through today that's like a four million dollar headwind versus kind of what you've you've printed in the march quarter so just trying to understand like the 150 is that as of today is that if we held everything flat um to the end of march because it just feels like talking to 150 when you've got a four million dollar headwind might be a bit tough or maybe not maybe you're still confident with the one yeah i mean the uk rates are still pretty consistent so it's just the us and you're looking at about a one point

buy a 1.6 cent variance to the rate used at 31 March. So you're talking maybe two, $2.5 million worth of headwind, which should still land us around about the numbers that Tim was talking to.

Okay, very good. And second question is just this move away from the multi-year contracts. You've called that 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 portion of that is just me mismodeling it, but... Just trying to understand how much, as we were, kind of environment cash receipts would have come in. Like, is it a half million dollar impact, a million dollars to a million bucks in this quarter?

Yeah, it's more than half a million. I think 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 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 probably where your expectation differential has come from, is more of the ARR than historically has been the case. It was pushed into that June quarter. So that's a combination of the UK probably being a little bit softer that Tim touched on earlier. So we're comping some pretty decent periods in the UK in the December quarter last year and the March quarter last year off the back of the KICSI regulations changing. So there was significant growth in the UK then. And so the UK hasn't gone backwards. It's actually grown a little bit, but it was comping a pretty tough period. So that's probably the other factor there. But yeah, you can see it in the pipeline data. All the numbers that we've talked about from a revenue or cash flow and all those sort of things are coming, but it's just pushed back a little bit further into the year is the other piece of the element.

Okay, 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, 10% to 15% or 10% to 15% less discounts across 10% to 15% of clients. So does that imply something like going forward a natural kind of couple of million dollar tailwind to ARR versus what we were anticipating previously?

Yeah, I mean, the question is whether we can get the price increase out of those existing customers that already have the discount. And to a degree, I suspect, and Kristen can probably answer that better than I can, but certainly for new business that's getting written, that discount won't be offered any further. Correct. Yeah, you have to wait until the renewal contract comes up.

All right, 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 kind of matter how I think about this. Like if it's, you've been pretty consistently growing that 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 grand 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.

Yeah, well, I'll start with it. Yeah, it was the top line sales. They're on budget, but we would like them to be. We've been impacted a little bit by churn. A big chunk of churn is the movement of schools out of local authorities providing filtering into. So 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 an opportunity for us to sell individual sales at a high price point but it looks bad in terms of churn so the big chunk of that and so maybe you can get a bit more color on that chris

Yeah, 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 $4 million of pipe and $1.5 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. And as we move towards the unification story and getting it to take 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 FY26. 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 am expecting, you know, greater contributions from them in the June quarter.

Yep. Brilliant. All right. That's it for me. Thanks, guys.

Thank you. The next question is actually through the Q&A function. So I'll just read it out. The US competitor is trading at 8 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?

Well, yeah, that's a risk and that's a well-trodden path with ASX 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. you know, how do we get the market 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 of 40, effectively, from 1 July, and we'll be rule of 40 forever. And comparable companies, even less performing companies in the private space in the US are trading at, you know, eight to 12 times multiples. um 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 um uh take the punt i guess uh so all we can do is keep reiterating that story that sorry that i'm explaining to you now about where the company's at and um and hopefully we can bring the market along with us

Okay, Wei, you should be able to unmute now and ask your question.

Hi, Ben, can you hear me? Yep. Hey, 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 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.

I'll start because we'll talk about more specifics. I was in the US mostly, well I went to the ASU GSV event, mostly I was there to speak to our competitors and the private equity groups circling our industry and just kind of get a read for how they're thinking. That was really interesting. There is a view in the private equity world in the US that there will be a convergence of online safety and real world safety. Obviously issues around safety in schools, you know, guns being brought to school, teachers protecting themselves, tracking students, hall 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 and real safety will merge. So I wanted to kind of keep abreast of 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, nothing's changed since we put out that release a few weeks ago. There was an element, there was without question a move in education to simplify procurement, single throat to choke, single vendors, however you want to describe it. And 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 EdTech Insights product is aimed at that procurement commercial function inside schools are looking for savings and we can identify them as well as anybody um 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 circumspect buying which i think is an opportunity for us so chris and then more broadly chris so for you to talk about you know where we win and how we win and then

Yeah, so the question was in regards to which sort of states we expect to win. We doubled our penetration in the Texas market through the TASC relationship in the last 12 months. I think we'll continue to see that growth in Texas. The parent piece that we have, which is truly unique, is a big part of why we're winning those deals into these Texas districts. And I expect to see a similar opportunity whilst a smaller state, still at 1.8 million students, Ohio, in the same relationship we formed there. I expect us to see a comparable growth within Ohio. Florida, we've got some material opportunities underway with districts well in excess of 100,000 students. In fact, we've got 25 roughly opportunities with student sizes of that range throughout the US. But Florida will be a large contributor for us this quarter. As Tim said, going back to Texas, we'll continue to see them outperform in the September quarter 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.

right thank you very much um and maybe just one more in terms of um on a look forward basis into fy26 um sounds like uk we're getting excited about the potential growth opportunity over there um us is also very strong so just on the relative um i guess um opportunities in in the two um you know larger regions uh how should we think about it which one are you more excited about

Yeah, so last financial year we added $19 million 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 a previous quarterly release is that we try and aim for 15% growth in our growth of the prior year. So we were kind of expecting for this financial year to get somewhere between 22 and 25 million of ARR growth. I think that's clearly quite comfortable now. But that's probably how Crispin's going to be. You know, he hasn't yet finalised his budget, but for the 26th financial year, that's no doubt how we'll be doing it. They'll be thinking about growth on our prior year growth. So, you know, 15% to 20% growth on maybe $25 million to $30 million 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 lock down that budget. Now, there is infinite opportunity. I mean, you and I were speaking about this. UK monitoring, the parental controls, well-being, the US. We're only 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 parental controls. 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 Crispin's team does this brilliantly, is they literally go down to account by account and salesperson by salesperson and give everybody a number. And that process gives us high confidence, predictability on this person has a million dollar target and most likely they're gonna get 80% of it and therefore they're gonna double their wage and so on. So that's how we build our budgets and that's why I think in these sessions we speak so confidently about our arr and our pipelines and how 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 feel like there is infinite opportunity but we kind of run our business much more granular salesperson account manager by account manager type structure no that's great color thanks tim thanks ben and thanks christian okay ross you should be able to unmute now and ask your question

Thanks, can you hear me now? Yep. Yeah, great. Morning, guys. I guess my two questions have kind of been answered, but I'll revisit it in some way. But, Tim, on slide 11, I guess where you're referring to the average revenue per student and you're referring to that targeting $10, have you put any timeline, I guess, on reaching that? It's probably a bit tricky, but 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.

yeah look it's it's uh it's a bit of price increases but it's mostly about cross sales and upsells uh we've progressed very very well in the last couple of years uh last year and a half in particular as you can see in those charts um look i've i've been aiming to get there by the 27th year whether we can get there or not i'm not sure it um Look, we'll know a lot more by the end of June, to be honest, with all these new products that sell, so 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 most customers have those. We have Monitor, which is probably 30, 40% of customers have that. We have Pulse. Very few customers have that. We've got the Custodio product, but it's a free product for schools, albeit now creating a benefit, a resident benefit outside. We have EdTech Insights, which has only just been launched. And it's showing unbelievably positive signs. And then EdTech Insights is going to then morph into more fulsome data analytics products inside the next six to 12 months, which should offer another kind of $2 plus per student product opportunity. so yeah that's i think that's six paid for products plus christmas got up his sleeve these content aware capabilities which he sells as modules or added value to the filtering and monitoring products which are another dollar per student per year each as well so in combination 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 our 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 product control piece you know selling through our expanded footprint of parents and then uh international you know the the problems that we deal with are an international another english speaking problem and so we've got a little business in spain that's i think doubling every year has has done so the 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, hopefully that answers your question, Ross. But definitely in the next 12 months, it's a high focus on unification, all our product available everywhere and lifting the product to the customer.

Yeah, that's very helpful. Thank you. Back on the UK, just for a second, I think you've, and I say this pretty well, but you said the growth of 7%, you've acknowledged it's a little bit softer, but you're also cycling a pretty strong PCP. um i was just thinking there might have been a timing issue where you know the growth that didn't happen in the uk uh that you were hoping to has kind of been pushed into the into the fourth quarter and that was one of the contributing factors to having a higher weighted pipeline but it feels like that's probably not the case and the weighted pipeline is probably far more genuine growth than a timing issue chris kind of that i think it's a it's a factor of both but mostly on the you know general

general growth of the ar pipeline uh ross so yeah we we are definitely through the as i mentioned before some of the just delays and decision making we saw through the government changes and budget concerns etc 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 uh like i said greater contribution from the UK, which this quarter is around 29%. Last quarter, it was less. In terms of expectation of annual contribution, I definitely expect this quarter to contribute more than what we did this quarter.

Yeah, great. Thanks. Just a quick one, Tim. I think you mentioned in the past the Octus VI, there was some cost savings there, just some internal processes they were automating. You're saving $10,000 a month on that. Could you just maybe revisit that? Have 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?

Yeah. So yeah, I think there's a whole range of cost saving opportunities. And one of them is the potential to increase investment in engineering in Sri Lanka, which is obviously somewhat of an offshore type model. We're building out 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 of months ago actually was in our moderation pipeline. So it's the data that we capture from these devices and cloud services and send to our cloud services for analysis. um and some tweaks that we did in there with our data team have delivered something like 50 60 000 a month of savings so that's now starting to come through those numbers um yeah there's ongoing work inside direct costs in our human moderation you know making that more efficient and support costs which i think was touching on before there's constant work going on uh including and of course you know product innovation which is the octopus's main octopus team's main role is to accelerate the delivery of insights into the decision makers in schools. And that's the thing that makes sure that we are truly sticky and allows us to increase our price points. And most significantly, I'm so excited about what that team are doing. I think they're The delivery of EdTech Insights inside like three months was unbelievable. And the work that they're doing on the evolution of our Coria platform and what we'll literally be seeing inside the next six months is astonishing. So yeah, it's a brilliant deal for us.

Okay, thank you. Thanks, Ross. We've got a two-pronged question through the Q&A channel. The 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 main thing to point out there really is that cash receipts are net of reseller commissions. Taxes are a separate issue and they're discussed separately in the cash flow statement. We obviously have tax losses still available to us, so that is limiting the amount of taxes paid at the moment. But yeah, 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 do see them in the P&L. The second part of the question is, how is the sales agreement with the broadband provider in the UK going?

I mean, not quite where I hoped it would be in terms of the pipe. We've got a few hundred thousand dollars of opportunities now. Fundamentally, it's partly due to the same issues that I spoke about before with the UK market, which have sort of almost readied themselves now. The other issue is just they've had two of their people move on. So we've had to then wait and work with the people that have been moved into the roles, and that's all now happened. so yeah it's been a little bit 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 close one opportunities and a larger pipeline that we have with uh and that's it for all the questions tim so if you'd like to wrap up

Yeah, great. That was a long session. Thanks, everyone, for attending, for all the great questions. Look, as I said, I think we've done a great job of maintaining costs. We've grown this business at more than 25% over the year. We've added $25 million of ARR in 12 months. I think in July, when we report the next results, they'll be even stronger than that. And we'll be very forcefully talking about being cash flow generating and profitable. So look, we're at that turning point. Hopefully we will just keep banging the drum as a leadership team. We'll keep delivering and Ben and I will keep talking to the capital markets and we're expecting to see the kind of markets turn their favour in the coming months.

Thanks, everyone. Thanks, everyone. Thank you.