Qoria Ltd

And we're looking forward to talking you through some of the highlights and having some Q&A at the end. As normal, Q&A can be asked in the Q&A functionality, or at the end, I'll turn on the ability to raise your hand and unmute microphone. Over to you, Tim.

Thanks, Ben. I'm just seeing people still jumping in, so I might give it a moment. All right, cool. I think everyone's in now. Let's go. So let me just quickly start with the highlights and position it, and then I'll go through some of this. So it was a massive end to the financial year in so many different ways. Let's start with the top line. So we added something like just over $29 million of recurring revenue in the year, which is uh 50 more than the prior year and it grew our customer base our our ira by 25 year-on-year days are outstanding figures um massive contributions out of walmart particular us and the uk um and we added 14 million dollars of net ira in that course up 55 on the record of nine million dollars in the same quarter yeah consumer businesses is flying at 18 million dollars or more of ira i'll talk more about that moment cash collections um there's been movements given the sale of business and movements in our billing cycles but now underlying collections grew 24 against the prior year gross margins are now over 90 operating costs and despite all that growth their operating costs grew at less than which is an outstanding result The first time we've now started to provide guidance on some measures outside of margins, and we're expecting really based on the visibility that we have in the business, we're now providing, you know, we're starting conservatively, but we're starting to provide guidance on things like revenue at $140 million or more next year, over 20%, EBITDA margins of 20%, being free cashflow positive for the year and for the half. and we're expecting cash collections to be very strong particularly in this coming half and with the same year-on-year improvement at at least so they're the highlights um huge huge end to the financial year provided unordered accounts financial accounts in this this result as well which ben jenkins will go through in a moment okay so let's go through it a little So some big numbers here. We're now looking after 27 million kids. We have more kids on our platform than there are Australians, which is a huge achievement. Eight million parents use our services, and it's actually 32,000 schools are on our platforms. We intervene in a life-threatening situation every two hours with calls being made to safety schools, and that's something that we all should be acknowledging and being proud of. On the financials, said past $145 million revenue that was negatively impacted by the weakening US dollars. So we would have otherwise been just under $150 million of ARR, which we're close to that now. As I said, we added $14 million of ARR in the quarter, which is 55% higher than the $9 million we did last year. I mean, think about that, $14 million added in this quarter. It was only in 2021 when we acquired Smoothwall, our entire business was $14 million, and we added that in one quarter, adding $29 million off the base in the year. Now, something I really think investors need to look at is this new market's growth. It's probably a... probably a confusing metric but it's something that i look at deeply this is the amount of growth in our business that comes out of the it k12 ip persona all of our competitors are selling to the commoditized it buyer in schools and 50 of our growth is outside of that buyer that's the reason why we'll dominate this industry because we've got legs beyond just the commoditized side of our industry So, yeah, let's touch on guidance. We had an outstanding quarter. We've also talked to and shown, demonstrated the certainty out of our exit ARR and how that revenue and cash flow. And based on that history, that confidence inside our numbers, we're now confident to talk about the next year. And by extrapolation, I think you can start thinking moments where that takes us in the coming years. So for this financial year, we ended with 145 million of ARR, $117 million of revenue, which compares to $117 million of exit ARR last year. Now ARR grew 25%, EBITDA margins were at the top end of our guided range of 10 to 15. It would have been high, we would have been just up And if we hadn't made some extra investments in marketing spend, we'd got top down at the moment. And our free cash flow was negative over the year of 11 million. But a big chunk of that was our movement from multi-year billing to annual billing cycles, which cost roughly half of that. So all those numbers were on or better than any expectations that we've been given. We expect to be comfortably free cash flow positive this half, free cash flow positive for the year. Revenue will be north of $140 million and ARR growth of 20%, EBITDA margins of 20%. It means that we are comfortably a rule of 40 company from 1 July going forward with a strong balance sheet and that will only be going upwards from 1 July. So I feel very confident to say that we've turned the corner and we're presenting ourselves as a very different business than we were two years ago. Okay, so let's drop into the numbers. As I said before, growth in all regions, but in particular, very strong growth in our US K-12 business, which added, I think it was like $9 million recurring revenue on their own in that June quarter. They're growing faster than anyone in the States. So it's done a tremendous job. Custodio business is, I'd say, I used to say metronomically growing, but they're actually starting to accelerate. I'll talk more about them. UK business is doing okay. All the products will be available to the UK market in for bet in the January, in January next year. Actually, sorry, I think that's March next year. And Australian New Zealand business on a tear grew 41%. They're doing an amazing job. We've kind of reorganized our go to markets in these markets based on the success of the US model. And that's now actually exceeding, certainly exceeding our budgets. So where are we at financially? We've got more than $15 million in the bank at the end of June. As I said, that number is only going up. So a net debt position of $37 million negative will never be as that low again. As I just mentioned, we're expecting cash collections to be well north of at least 20% higher than what they were last year. And in this half last year, if I recall, we collected just under $70 million. So we're in a really good position from cash flow. I saw some commentary about capital raisings. That's ridiculous. We're not doing capital raisings. So balance sheet's good. Cash flow's in a really good place. And in a place where we can actually start making some very sound decisions around where we allocate capital to maximise growth. and make sure we achieve these strong guidance numbers that we've offered. Now, our growth, again, not only by the regional store, so we're now getting serious contributions from things outside of new logos. We've very much been a new logo sales business, but now we've got significant contribution from cross-selling new products. That's only going to accelerate as, in particular, our insights and content wearer products become more well-known in the market. and then the custodial growth is is outstanding and this is the key selling period for custodial you'll see big selling in this half of the custodial consumer business we were negatively impacted by fx that that you know goes both ways we have guidance at the back of this slide which ben might touch on which shows that whilst the ax the fx movement cost us in top line ira by four million dollars and has a revenue impact it also has a cost impact because a lot of our cost of sales data and hosting of course and a lot of our big chunk of our staff about 90 staff that's dollars so the net effect of that isn't massive but it doesn't doesn't does does impact our headline ira number all right kristen swan's on the call who runs our k12 business he's available for questions And we are literally killing it, as they say. The US business in particular has an immensely successful period. Not only the highlights of the ARR growth of $12 million in that business, which is astounding, some really key things. We've won our first district in some of the top 10 school districts in the US by student number. That's huge. We added 1.5 million students, more actually than in the quarter, which is amazing. We grew our average order value or average sales price we described here by 20% in the quarter. So that means that we are building a reputation and selling it to bigger and bigger school districts. Enormous figure. We're maintaining our net revenue retention and keeping our churn under 5%. um and we've signed another state deal which um which i'm really excited about so pennsylvania has selected us as one of their preferred partners in that region which is a huge achievement so all metrics in in our education business are doing very well particularly in the states and australia new zealand as i said we'll have the entire core platform all of our capability will be available in the UK in the first quarter of next calendar year. And so Gab who runs that business there will be actually start to accelerate across selling into 26. So that's super exciting for everybody. Consumer, we tried some investments. I think we invested about $1.5 million above budget, given the kind of, our understanding of and so on into that custodial business and achieved unbelievable results. Cost of acquisition of less than the average order value, especially cash flow creating growth, albeit it costs us in our P&L sense because we have to write off the cost of acquisition and we take the revenue over time. So, we cut that back, we pulled back on marketing investments in the custodial business to hit our EBITDA guidance, but from 1 July that's now taken off again, and I'm sure you'll see very exciting results in that business. Now, just to put it in context, Life360, which people often compare us to, they spend $90 million in marketing every year, and we spend, in the consumer business, I think five or six. If we spent like 360, we'd be a multi-billion dollar business. And I think in time we'll get there because of the performance of this business. And you see here the evolution of the product, the experience of that product is evolving rapidly and is without question the best parental control product. And it's now becoming much easier for non For the users who are kind of less anxious about controlling their kids, and these are the parents that we're now trying to target through our schools program in the US, which is clearly making an impact on our cost to acquire, which is coming down very, very fast. So outstanding business. You'll hear a lot more. You'll hear me talking a lot more about custodial business in this half, which is their key selling period. So I think these are really interesting slides to highlight the efforts that we've put into maintaining our cost structure. Fixed cost percentage of our ARR is falling very nicely. As I said, our service margin or gross margin excluding marketing costs. is over 90 percent now there was a three-point increase there in the quarter and our sorry in the year and our net ar so essentially our forward cash collections right the next 12 months collections which net ar is essentially analogous of as compared to our cash costs is showing heavily positive figure so unquestionably we're at that inflection point or through the inflection point um the predictability and i know i'm probably going to get a question from owen about this the predictability of our sales from pipeline to converted deals to revenue and collections is a feature of this business and so we've um obviously reported 145 million dollars of ar uh at 30 june and so if you look at the the chart at the bottom our ar highly correlates with our next old ones revenue so you know that's why we're now confident giving guidance of 140 million dollars of revenue in the next year And we've also given guidance on growth that we're expecting the next year. And then you can start doing your sums about where revenue will go going forward. So, you know, as I said, every dollar that we add is adding 91% to the bottom line. We grew $30 million last year. We're expecting to go higher than that in this coming year. So you can do the math and see that we're not only free cash flow positive, we're paying down our net debt very quickly from the 27 financial year and there on. I won't dwell on these metrics because the Aussie investors don't seem to be that interested. Our SaaS metrics are, without question, industry leading. And this is a really important chart. I know people kind of flick to the back of our call the update and look at the 4C report, but what's missing is the nuance of understanding what's transforming and how During COVID, many schools were paying multi-year funds. The money was a plenty. And so they would commit to three-year contracts, even five-year contracts to get filtering and firewalling and so on. That's not so much the case anymore. And obviously to get those multi-year deals, you discount in the order of 15 up to 25%. And so now our business is moving away from these multi-year billing into annual billing cycles. And so that kind of working capital, sugar hit that we've been enjoying to help fund this business going forward when moving away from. So our margins are improving very rapidly, as I said, into the 91% range. But it's impacting working capital now. And you can see it clearly on the June section of this chart, the right-hand three columns. So June 23 to June 25, we've seen a very significant fall in the amount of multi-year upfront cash collections that we're getting. Essentially, we're borrowing less money from customers, but it's translating to higher margins. And so that had a big chunk, that and the loss of, and the sale of the McGeary business last year. negatively impacted our cash collections this year by 4.1 million dollars on a per comparison comparative period basis so if you do the sums actually billing underlying billing and underlying annualized receipts were 24 up year and year which is exactly what our ARR growth was the year so the underlying business is is only strengthening and that is translating into cash flow Pipeline, obviously we emptied the pipe surprisingly well in that June quarter. And so you're seeing our red column here shows that the pipeline's come off a lot. but it is still a record pipeline into the December half and our marketing team who are exhausted and they're coming back to work now. They're kind of busy again, back to work, trying to refill that pipe to make sure that we're kicking goals and hitting records again this quarter. We're in a fantastic position with nearly $9 million of weighted pipe into the December half. Remember a big chunk of US sales are still in that September quarter, albeit we did do a cracking job at converting those in June. And the Australia and New Zealand team who are on a tear, as I said, their key period is the December quarter. Some good things happening for the December half. Generally, though, the US and UK teams are focused on back to school, delivering outstanding experiences for customers, and the custodian business will be a big revenue growth period for us. Okay, less financial. I think it is worthwhile that investors realise the impact that we're making or from time to time hear about it at least. So in the last year, we flagged 26 million risky behaviours by kids on our platform. 26 million times kids did something on a platform that was so notable it had to be flagged for further analysis. Of those, 2 million of those concerns, so no, 10%, just under 10% of those concerns were handled by our human moderation team in the UK who deal with some very harrowing moments, life-threatening often and sexually charged frequently too. And of those, 4.4 thousand, four and a half thousand had a call, required a call to be made to a safety lead or the authorities. That's a call every two hours to deal with a child who's at imminent risk to safety. That's an extraordinary achievement. These pie charts in here, these circles in there, show something that's quite intriguing, which is the distinct difference in level five, which is the most serious concerns that we capture, the distinct difference between UK and USA toxicity. porn sexualized content in the us is the dominant concern that is is raised the the configuration the tools are the same it's just that the incidence of of highly concerning uh access to pornography in the us is you know was it two times twice as big as the uk and australia new zealand and australia new zealand is much more about kids at risk of self-harm, and that's the purple parts of these charts. So we're seeing remarkable data now, and we're actually also starting to see clear data that shows the efficacy, the evidence of the safety outcomes, and soon to show the learning outcomes adjacent to the things that we do. So I'll be reporting more of that coming soon. I'll just mention that we won this deal. So this is the third state that's picked Coria, or line-wise is the name of our product set in the UK, as a preferred partner. So this is an outstanding achievement. US team, this gives us access to preferred access to 1.7 million students in that market, in a market that's essentially half the size of Australia, which is, so it's an outstanding achievement. And the agreement encompasses all of our products, including EdTech Insights, which is our brand new product line. So that's the high-level overview. I think it's an amazing result, both in top-line growth maintaining our cost structure where it is, improving our gross margin, improving our underlying cash collections by 24%. So every single line was an outstanding result. We're now cash flow positive into the future and growing strongly. So I couldn't be more proud of the team. I think we're set up for success and continued domination of this segment. I'll now hand over to Ben who will go through the numbers and we'll then hand over for questions. Over to you, Ben.

Thanks, Tim. We decided to include an unaudited panel to show people where we landed, again, on an unaudited basis for the full year against the guidance we provided. And so looking at that, we landed at about 13% EBITDA margin. And with Tim's talk about the custodial investment, that was a conscious decision to make. You would account for that and adjust backward about 14.4, so towards the top end of the guidance range that we're given. And as I say, it was a very conscious decision. It wasn't something that was out of our control. So it's an easy one to, I guess, isolate and identify as a normalisation. And in the months where we made that commitment, or made that spend, the ARR added in that custodial business was more than double what it was in prior months. So the impact it had was really significant. And I think I just take the opportunity as well to reiterate Tim's point around capital raising and marketing custodial because we've had a few questions on conferences over the last little while. There is zero intention to raise money to fund custodial marketing. It'll be funded out of excess cash flow. And we can tweak it up and tweak it down within a day's notice if we need to, depending on how the business is operating. So we will manage that spend through the financial year with the guidance we've given around FY26 in mind. So I think it's just an important thing to reiterate. The really pleasing thing outside of our ability to keep costs under control throughout the financial year again, I think it's been a really big achievement and just shows the leverage that's within this business. Quarterly cash flow, Tim's touched on the customer collection, so I won't labour that point too much more. We split out the data in the chart earlier in the presentation, so you guys can see it really clearly as to how we've performed there. Obviously, on face value, cash collections looking flat is something that might raise questions, but when you dig into the detail, you can clearly see that the annual billing has increased significantly year on year. broadly in line with revenue. I'll jump more into the detail on the next page. So again, touched on cash collections, direct costs obviously out there, but that is largely the marketing spend. You strip the additional marketing spend out of that and direct costs are well under control. and being managed excellently by the team on a per unit basis. It's continuing to come down. We've touched on the direct cost before and that it is a variable cost and will increase as the business grows. But the per student number will continue to come down over time. So we'll get efficiencies out of that piece. Staff costs. broadly in line with what they've been for the last couple of quarters, notwithstanding pay rises that have come in in the October month and the April month. I'd expect staff costs over the next financial year to be somewhere in the sort of 5% to 6% increase range, accounting for CPI and some growth heads. Maybe it's slightly higher than that, depending on what FX does, but it should be broadly in those lines. No dramatic increases needed in staffing levels to justify or to deliver the growth that we're talking about from a revenue perspective. Fixed costs, it can bounce around a little bit, and it looks like a big percentage, but it's a small number. So again, broadly in line with March quarter, and we expect that to continue on. There's nothing significant that we need to invest in in that sense. Hardware costs are largely seasonal in the increase from March quarter to June quarter. They're in line with last year, in fact, slightly down. trending in a good direction. And for the purposes of the normalization of the June quarter, I've actually split out the detail there so everyone can see it really clearly in the bottom quarter. Tim touched on the FX exposure previously. You can see from an ARR perspective, the one cent movement is reasonably significant. But from a net cash flow perspective, it's much, much smaller. So we're reasonably naturally hedged as a business due to the US dollar and the pound cost that's going out of the business. FX has moved slightly favourably to us in the last couple of weeks as well. But as I say, the net impact of the bottom line isn't massive. So we're relatively comfortable there. And on that basis, we'll jump to Q&A.

Thanks, Ben.

I just need to turn on microphones. Give me 30 seconds.

Owen, you should be able to ask your question now. There he is. You're on mute now.

Sorry, I had to... I was not in the desktop. Let's just look at the different screen. Well done, guys. Good set of numbers. All the leading indicators are very strong. Just a couple of questions for me. One, more operational, but just adding 10 mil in the K-12 business, that's a big uplift. Can you just kind of talk through... The drivers of that 10 mil, how much was, call it the call filtering and firewall, how much was the new products with monitoring and the various others that you're pushing through the platform? How much was just kind of just talk through the drivers there?

It was 12. It was 2 million across an upsell and the rest was in new logos, if I recall. But over to you, Chris.

Yeah, that's correct, Tim. Still the majority out of the U.S. is in the new business, new logos, Owen. And that's come through, you know, going up market as well as Tim mentioned, average sales price went up materially. In fact, the top 10 deals that we did last quarter in the U.S. had an ASP of about $350,000 Australian dollars. So there is a great emphasis moving forward on upsell, cross-sell. and we do expect that percentage to continue to grow, but we're still at 16% of the market on a student basis in the US if we focus there. So the new logos will continue to grow and we've got many different levers made to continue to see new customer acquisition as well as new products like Tim said, EdTech Insights is hitting the ground and new other modules. So there's a lot of opportunity along with some of the channel deals that we've referenced before with CDW. I'll leave it up there, but yeah, you'll continue to see accelerated growth in both new business and up-sell crossover.

But in terms of the product drivers, is it predominantly still the filtering and firewall that's driving the new logo growth?

Filtering, firewall, classroom management, all of the above. And we did... close I think about a quarter of a million dollars in the quarter of EdTech Insights for early kind of customers. So I've been expecting much greater contribution from that sort of data analytics products moving forward.

Well, one thing that's of interest is the Monitor product, which we acquired with Smoothwall in 21, had about $5 million of recurring revenue. That product on its own passed through $30 million of ARR 30 June. So, you know, that's becoming part of the packages in some big deals, but mainly across them.

Yes, I'm just trying to understand, it's like the 10 mil of the new, how much was the kind of monitoring, how much was new products, how much was filtering, if you get a product split at that 10, just understand if that's changing over time.

All of that will include filtering and classroom management, possibly some firewall in the UK, and a small portion of that would be initial purchase and monitoring, I'd imagine, but most of the monitoring is across sellers and customers.

The mix has been pretty consistent with the last sort of six to 12 months.

And just shipping across to the guidance then. So OPEX guidance goes from, I'm assuming the GP margin of 72% will hold into FY26, just around operating leverage, but around reinvesting in custodial. So first question, is 72% the right number for FY26 GP?

Yeah, I think as a starting point, that's about right. Hopefully we outperform that a little bit, but you're right. If custodial is performing well, we're getting good growth there. We'll look to reinvest.

Okay, so OPEX guidance around that 73 odd mil mark. The real question here is in FY27, you're kind of given FY26 ARR guidance, which is quite large, which kind of gives an indication of what FY27 revenue would be. We kind of know what the GP margin should be or thereabouts. Can we talk through what your view around the OPEX increase will be into 27? And the reason why I ask that is because the operating leverage gets very large. If you're growing at 20%, is the expectation that you'll reinvest half of that? Or do you have a number in mind as a 5%, 10% OPEX growth? Just talk us through that.

Well, our target internally is to just CPI growth, the OPEX only. We're finding efficiencies in particular, in front of the house, Kristen's driving, efforts with AI tools to drive efficiencies in front of the house. In the back of the house, again, AI unification work and the movement of our engineering, a lot of engineering growth is into Sri Lanka. I think we're adding Gee, what's the number? Ben, it's like 30 people this calendar year into the Sri Lankan team. So there is a strong emphasis on optimising our engineering and product expenses, which is the lion's share of our costs. So, yeah, I think if you modded CPI, I'm hoping I can outperform that. If we mod CPI, the doors open up.

Sure, definitely do open up. And then custodial, so 1.5 million. additional in marketing in that quarter i guess that was uh new information that you added two mil in the in in the quarter uh obviously just understanding the in economics here because i thought most of the growth would have come from like the b2b to c channel which is obviously much lower cac and you just talked about the one and a half mil step up i'm guessing that's in performance marketing um so just talk us through how we should be thinking about unit economics within the custodian going forward yeah that's um

I'm actually organising for Victoria, who's the CEO of Custodio, and Tamara, who's the head of product, to run a session, which is hopefully happening next week. So you might get this opportunity to ask these questions directly to Vic then. In simple terms, what we found in that trial period, in the kind of first quarter into the second quarter of this calendar year, we were finding average order values of north of 60 US dollars and average cost to acquire a customer of less than that. that's a little bit of performance marketing but what we're starting to play with is in social media investments and brand building and that's layered on top of the b2b to c piece so essentially in simple terms what we're finding is that the an effort in that brand building and communication with schools is lowering our average cost to acquire in these key markets that we're operating in in australia the uk Brazil and, of course, the US. And they've also done a very good job at hijacking things like the adolescence TV series that came out with Netflix. The team's an outstanding, responding very quickly to hijack that news flow and then turn that into eyeballs. So yeah, it's a bit about performance marketing, but more increasing amount of their investment is now into social channels and, of course, generative AI type search. What we're hoping to do is obviously hit the guidance number one, not raise capital number two, but fine tune that business to not invest any more than they generate and they're seriously profitable now. um but ideally you know optimize acquisition at around the average order value so it's you know it's it's cash in zero cash impacting growth but i think that's certain times a year that's going to be very possible other times a year not so much but that's how we're trying to target that business good one well done guys it's um it's uh it's a great setup for the next two years thanks man

Ross, you should be able to participate now.

Can you guys hear me? Yep. Great. Hey, morning. Congrats. Just two for me. Pennsylvania, can we talk about that a little bit more? You said it's a panel. Is it fair to assume it's a panel of two like it has been in the past? And then the second part of that one is you also called out that four products could be sold into that opportunity. I guess historically when you've had these opportunities, you've started with one and then shown them the menu and they can buy more over time. Should we read it that you're able to sell far more earlier on into Pennsylvania than you have in the past?

Yeah, maybe I'll hand over to Chris. But yeah, look, it's a panel. It's essentially that we've been endorsed by the state as a suitable product for that market with a great pricing with that market. And so it's a big leg up. But, you know, Chris, over to you to explain more.

But you kind of summarized it well, Tim. Yeah, it gives us the contractual relationship of the incentives to work with Pennsylvania for them to promote it out to their districts. So you can think of it similar to Tassie and also the Ohio Management Council deal that we've referenced previously, Ross. And yes, in this case, we've been able to, from the outset, get all of our products onto the pricing list with them. So yeah, you know, these things take a little bit of time to get going, but certainly my expectation is that this, as well as Ohio, will start to follow the successes that we've seen in Texas with Pazzi, where I think since that deal was done, where we're now at close to 20% of, you know, subscriber base in that market.

Okay, great. And sorry, is it a panel of two?

Did you mention that or did you not mention? I haven't mentioned it. We... We believe it's a panel of three, but they haven't told us to be direct. So we're making some inferences there, Ross.

But a low number still by the sounds of it. Yeah, correct. Just the second one, just on free cash flow. Do you think that each quarter in 26 could be free cash flow positive? And if not, maybe call out the one that would be, or is it more of a 27 story where you can be pretty confident that it can happen?

yeah um first half so september um strongly free cash flow positive december positive but uh less so march and june will still burn cash um uh but hopefully to a lowering degree obviously than this year um and on balance over the whole year uh free cash flow positive and without getting too far ahead feels like that just gets closer and closer in the uh in the 3q4q in the 27 year It does, and I think custodial will be a big part of that because it's got a much smoother profile of billing annually. I think the March and the June quarters, from an education perspective, they'll never be huge quarters because the Australian and New Zealand markets are really the drivers of those two quarters from a cash flow perspective, and they're not. They just don't shift the dial. So I'd say it's probably, I'd say it's more likely actually 28 before you get to a free cash flow positive in both of those quarters. 27 would be pretty close.

And just a super quick one. The weighted pipeline at 9 mil is a good number, but also flat year on year. Would you have liked that to have been higher? Or is that just an example of just good selling that got the weighted pipeline back down to that number? Good conversion?

That's correct, Ross, yes.

The other thing to point out, it's in the data that we've used to calculate the weighted average conversion of the US pipe. It continues to build in July, August and September. And one of the years in the last couple, the pipeline actually converted at 110%, funnily enough. So not saying that that'll happen this year, but it's a unique period in the year for the US with the September year end for Texas and a couple of other bits and pieces.

Great. Thank you much. Thanks, mate. Thank you.

You can unmute yourself, Wayne.

Hello. Hi. Have you got me? Yep. Cool. I had a phone call come in at the exact same time, so I wasn't sure what was happening. Okay. So a couple of questions for me. So I guess interesting comment about your ROI on marketing spend in consumer and how you dialed it back to basically achieve your guidance despite it being highly cash accretive. So what have you baked into your FY26 guidance for marketing here on the custodial side?

Yeah, I mean, I won't give you a specific number off the top of my head. It's, I guess, in simplest terms, it'll be a similar level to what we've got in the Q4 spend. Over the full year, though, annualised? Over the full year, yeah. But as I said, it's an inherently variable spend and we will manage it accordingly.

Yeah, and what channels do you use to sort of market that?

Oh, the main one historically was obviously Google AdWords. So paid advertising for all those performance channels. It's affiliate marketing through online websites where you can find out about technology or apps or whatever. And then now, increasingly so, it's finding influencers who are promoting our product or just general content, AI-generated content, too, inside social media platforms. And they're toying with how do you get

identified in these AI tools as well so it's pretty broadcast yeah okay cool thanks um and then um I guess a couple of years on um as you get more growth and more operating leverage you're going to go from a net debt position to a strongly net cash position um so in your view what is the best use of surplus cash

Looking forward to that day when this is a real problem. I was on a chat with a group of staff, 50 staff globally this morning, and talking about this. And ultimately, I think the number one thing for our business is to focus on what our customers need and buy or build products that customers need, make sure it makes sense for them. and you know that will then the money will then follow from that so i think that's really has to be the core focus now if if in so doing it's so cash generative that there's a dividend potential then of course you know we'll do that when when it comes to that but i don't i don't want to be in a position where we're just buying adjacencies compared to say oh well you know you sell to school so let's do this too i don't think that's the way it should work i think we need to be very conscious and circumspect about what makes sense for customers and extend out there those ways

To give the really boring financial answer, you know, leverage isn't a bad thing, but the current debt that we've got is expensive. And so I guess reading through the lines of your comment, do we leave the debt there and continue and invest in the business? That's a possibility, but not with the existing facility. We would look to refinance it at the very least to more commercial terms and then make decisions from there.

Yeah, cool. That's all for me. Thanks, guys.

Thanks, mate.

Lastly, should be good to go.

found the unmute button mate yep there he is hey guys just a couple quick ones from me i just wanted to follow up on your um on your target of ten dollars per student arpu which product in particular uh do you think will drive that in the next few years and if you could just update us on where the ai filtering on videos is at

Yeah, so I think the number one thing that's propelling us forward is the monitoring product, and that's still less than 40% penetrated in both the UK and the US. It's a heap of white space just for digital monitoring, which is a very established need in both those markets. Then it's the content-aware modules, which is at the moment standalone pricing, add-on pricing in our markets, but will probably just be embedded in higher-priced filtering products going forward. EdTech Insights, which is the ability for schools to analyze all their data to look at the efficacy of their hundreds of millions, if not billions of dollars of spending on apps inside their institutions. And then later stages of this product is then connecting all of that data into human outcomes. So we expect $1 to $2 price points for those sorts of new products coming in the next 12 months. well-being analytics and the well-being products, which is nascent in our business. I think that there's still a long way to go on that product as well. So heaps of things coming and some we already have and it's starting to show penetration. Chris, do you want to add?

I just think, yeah, you probably overlooked the new capabilities that we're delivering over the next half into Monitor. So it's by far our highest ARPU product. And we're delivering, we have delivered cloud scan, but now we're moving that to the ability to interrogate Google Docs, email chat. And what that will do is twofold. One, it will allow us to increase our pricing. And secondly, it will make us, we already are, but the absolute, the market dominant player in that space. So we'll see a far greater conversion ratio of monitor deals. As Tim said, yeah, across, The UK, where we've been very successful with Monitor, we've got 40% of our existing customer base. We've got 4,600 customers only that have Monitor. And in the US, that number is even lower. It's like 24%. So massive opportunity even in our existing base for cross-sell. But equally, as we get better and better, I think we share that data, but the continued growth in how many products where we have per customer.

um you'll you will see more bundling and therefore again a higher a higher rpm yeah so i mean look it almost appears you're not you're not too far off your target at the moment right and so you've just called out a whole range of uplift from monitoring, including the cloud scan. You've got the AI filtering components, which can add more up who you've got in tech insights. So, you know, in a year's time or so, is it possible that you could be recasting where that potential is? And are you thinking about other business lines that you think are a natural fit to really entrench yourselves within their school ecosystems?

Yeah, we are. And thanks for pointing out that trajectory. The trajectory is about fantastic growth in our ARPU K12 products, but also global products. So yeah, we're really on a really strong pathway. And the insights analytics products from Octopus, I think is the thing that's gonna propel that again forward in the next two years. Beyond online safety and student wellbeing, there's some natural extensions. Some of our competitors are entering real world safety, things like hall pass management, visitor management systems to dismiss your kids. Like literally there are schools in the US where you have to register to pick up your kid after school. So there's those sorts of things which are safety adjacent. security, tons of funding in security because schools are being hacked constantly by threat actors, mental health support services, at least on the data side, but potentially beyond that, heaps of things. Ultimately, as I said earlier, we need to make sure that what we do makes sense for customers. And our view is that what we need to be is deeply embedded in the workflows of schools. We need to provide beautiful experiences And we need to be part of the decision-making of the institution's executive, and that's the thing that gives you sustainable advantage. And so that's how we think about these decisions.

That makes sense. Thank you. That's it from me. Thanks a lot. Subject?

Hey guys, thanks for the questions. Just a few from me. Firstly around the USA market, just keen to understand where your market share is now. And I think you mentioned that earlier, but then perhaps sort of where it was three years ago and whether that's accelerating and your ability to continue to hold growth looking forward on a headline dollar number or on a percentage growth basis. Thanks.

Chris. Yeah, so as I mentioned, James, we're just shy of that 16% market share on a percentage of the students that I think is about $55 million in the US. But there's still massive upside there, clearly. So we talked about some of the tailwinds regarding going up market. I mentioned some of the successes just recently, greater product bundling, edtech insights, those other things coming into play. So for me, when I look at the US in particular, we've got massive greenfield opportunity, the significant brownfield opportunity into our existing base for cross-sell. We've got opportunities. There's a big, I'm sponsoring that in the organization, focus on continuing to improve our already market-leading retention. Price increases because of the improvements in products. And even whilst it's not a short-term focus in the US, we started to look at markets like Canada that open up another 5.5 million students, 16,000 schools. So the potential there is really just starting. So I don't see it slowing. I actually see it accelerating in the US. Then we get into the UK, as Tim mentioned before, the full expression of our solution sets come into the UK shortly, and they're proven in capacity to be able to cross-sell, or they were like 44% of their total new ARR was cross-selling, and they've essentially only got two products. we'll start to see a real positive turnaround in the UK and we'll start to see their growth getting back into the double digits as of FY26 and beyond.

Excellent. And also, I mean, one of our original premises is when we picked up the stock a while ago, it was kind of around B2C intercepting B2B, originally got us excited. Can we have a bit of an update on that and potential for that pillar of growth over time as well?

Yeah, look, I think it's a winner. It's not turning into direct dollars that are flying from B2B to C upsells, but we're getting, I think we've got 15, 16% of our US districts have now launched the program. The process of launch are taking longer than we'd like. We're working on that. But then getting north of 20% of parents signing up to the product, we're getting 1% of them paying for the product. There are more than 100,000 parents using it now. But more importantly, what we're seeing is the brand benefit of it is astonishing. The impact on our cost to acquire is very clear. No more clear than in Australia, where I think we talked about this years ago, James. Custodio was outside of the top 10 of Custodio's highest performing markets. Custodio is not overweight in marketing in this market, but Australia is now the number third top market for Custodio. The only difference is there are 130 private schools here talking about parent controls and talking about custodial as an option. And there's no question we're starting to see the resonance of that in the US market. So what's clear is it's this overall play we have of solving the problem, the school community and building a brand and talking about parental controls and school safety all in one breath is improving our business in all parts of our business. Even deals in telco deals are coming to us, both on the K-12 and the consumer side because of that capability. So it's, yeah, look, I think it's really working. I think it's a massive strength of ours.

Just to add to that, Tim, if I may, James, one of the other things So the indirect benefits we're seeing of what we call community is just the increase in, I guess, close one ratios we're seeing across our filter offering. It is undeniably the market-leading proposition where a superintendent can engage their parent community and provide them capabilities on that school-owned device outside of school and ultimately pushing custodial onto their children's phones and tablets. that level of capability doesn't exist in any of our competitors and is very hard to replicate in the short term so it is a big reason why these customers that are signing up to us initially for filter because community is a core part of that proposition then we see a very high attachment rate as i've spoken to in the past of class class wise we throw a monitor and shortly i take insights it is helping us get our foot into the door and then expand. So that piece of it, for me, when we look at the kind of supporting effects of what Keystudio is doing for our B2B is significant.

Appreciate the detail there, and maybe just a couple more. In terms of larger deals, you've won recently Ohio, SoftBank, Schools Broadband, now Pennsylvania. Can we get an update on where these are at in terms of penetration and potential over time as well?

Yeah, sure. I'll start with SoftBank. So that's live online. The next step is, I think I've said a few times, is their retail channels. That's being pushed back for technical reasons from their side. We're ready to go. So waiting on that one. We'll start reporting numbers, I'm sure, within the next three to six months on that. That's a strong commitment from BBSW and SoftBank. So super excited about that. Do you want to talk about the K12 ones, Chris?

Yeah, so schools broadband openly has been frustrating and a disappointment. We actually spoke about it on an internal call last week, James. There's been changes in the head of sales within schools broadband. But without going into too many details, we've essentially got a new head of sales on board. We're aligned with David, and I think you would have probably attended his webinar we did some time ago now to have kind of monthly executive reviews of progress. Previously, they were not giving us visibility of deal registrations because of their markup methodology that we agreed. We're now going to see every deal reg so we can support them more actively in helping them close those deals. So, yeah, it's been frustrating, but certainly expect us to be able to start talking about some more successes out of schools broadband. I think Tassie, we referenced, you know, the growth there and in particular, you know, how we've accelerated to close to 20% of Texas students through that consortium relationship. Ohio, and we've just mentioned Pennsylvania, are just really quite fresh. But as I said at the beginning of this call, I'm expecting that we'll start to see similar traction to what we're seeing out of Texas. So more to come, James, more to come on those.

Thanks, guys. We'll explore some of this later. Thanks for taking my questions.

Thanks, buddy.

Ron, you should be able to unmute now.

Hey guys, can you hear me? Yeah. Just a couple of financial questions. In terms of the balance sheet, the 52 mil Ashgrove facility, can you just pay it down as you go? Are there any penalties? Can you just clarify that?

We can pay it down, but there are make-holds within the agreement. We're about two years into a prior review deal, so right now it makes more sense for us to keep cash in, in terms of deposits and those sorts of things, and offset the net interest margin. But come FY27, 12, 18 months down the track, they'll make some sense to start chipping away at it. and start paying it down as those make holes become a lot more minor.

Yeah. And then you mentioned FY26 to be free cash flow positive. You finished the year with 15.4 mil of cash. Should we expect that to be the lowest point in the cash balance through FY26 or it's going to dip below that 15.4 through the year, but maybe finish higher at the end of the year? no that should be the last balance and come to this time next year it'll be a slightly higher number yep and then just in terms of the capitalized cost so you did 21 mil of capitalized development costs through the year but the last quarter was 6.2 so are you kind of annualizing more like 24 25 mil or is it

No, it's an estimate throughout the year, a little bit more accurate at half year for half year reporting purposes and then we do a really large exercise of timesheet reviews, engineering department go through, fine tooth comb, identify everything that they've done throughout the year that's R&D related and finalise the number for full year accounts. so there's always a little bit of a trip in the june quarter i'd expect the number next year to be the same plus your your wages increase so you add five or six percent to it and that will be the the number for next year it should be pretty steady and then property plan equipment that was sort of six and a half mil i mean what what are you spending that on it that's quite high i mean you're not a just a bunch of computers and No, that's almost entirely appliances that go into schools and school districts for the filtering product. So that would be 95% of it. The rest would be your staff laptops and other bits and pieces. So the filtering product offers a hybrid system where you have cloud only or there's inline filters as well that are effectively serviced that go into the schools and school districts. But there's been a huge amount of work put into that to keep the cost flat year on year, even though the business is growing. So that's just about efficiency in the process, making sure we're not returning appliances that don't need to be and replacing with brand new ones at no cost and all sorts of different things like that.

So going forward, that should remain around that six, seven million a year. Is that kind of it?

It'll grow a little bit, but not straight line with revenue. If it's six and a half, call it seven for next year and maybe seven and a half for the year after that. Yeah.

Yeah. Okay. All right. Well, that's it for me. Thanks. Great result. Thanks, Ron. Thanks, Ron. That's everything, Tim. So if you want to wrap up.

Yeah, I will. Look, thanks everyone for joining the call. We had over 100 people. That's a record, so it's a lot of interest in us, which is great. And as I guess I summarised my section with, I think we're now set up with a business that's growing strongly with high visibility, growing in all of the markets that we operate in, with a whole range of optionality in the business with new products coming to the markets that we operate in, which is very exciting. Um, cash generating profitable, you know, we'll be talking now, um, on the basis of us being a cash profitable business this, this year and a rule 40 company. So, you know, really great position to be in. Um, thank you everyone for their support and helping us get here and, um, looking forward to speaking to you in the next few months. Thanks so much.

Thanks everyone. Thanks everyone.