Text S.A.

Ladies and gentlemen, thank you for standing by, and I would like to welcome you to the discussion on Tech's Q3 2024-2025 KPI conference call. The call today will be hosted by Marcin Droba and Wuzia Kaseya from the Investor Relations Department. At the end of the presentation, we'll have an opportunity to ask questions. So without further ado, I would now like to pass the line to Wuzia. Please go ahead, ma'am.

Okay, good afternoon, ladies and gentlemen. Thank you for joining us today to review TechSA's performance for the third quarter of 2024-2025. I'm pleased to share some of the key highlights and insights into our financial and operational achievements during this period. Also, thank you for showing interest in meeting us right at the beginning of the year. I would like also to start by thanking those representatives of institutions who evaluated us in the EXTEL survey. We debuted in the top 10 among Polish IR teams in this ranking, which is, of course, a quite pleasant distinction for us, especially considering that investor relations are often evaluated through the lens of stock performance. Today, we will discuss the data we published on January 3rd. And I aim to update you quickly on where we stand in executing our strategy on building suite. To recap, just very briefly, we are a company called TEXT, a Polish company in the software sector. It will be 11 years since we debuted on the West Stock Exchange. We operate in SaaS model, software as a service. We offer our products, live chat, chatbot, helpdesk, knowledge base and open widget on the global market. We are also working on additional products and our strategy goal is to create a suite offering. What is the difference? Today, each of the products addresses specific challenges faced by the community by the companies in the communication area. For live chat, it's online communication and monetization. For chatbot, it's automation. For helpdesk, it's solving customers' problems, et cetera. The suite will address the entire area of communication, customer support, and even more. And now into Q3 KPIs. We will start with the payments received during the year. As you know, they are no longer revenues. This is the sum of the payments that we get in a quarter, whereas the revenues are recognized in subsequent quarters. In these annual payments, our lower share than usually, you see that the payments received year over year grew only by 0.4% and it was 6.2% decline compared to the previous quarter. Should we be concerned? A little bit, but we have to remember that the revenues for this quarter which will be reported later in February will benefit from this change of the recognition of revenues from annual payments received in previous quarters. We also expect to return to higher annual payments shares in the upcoming quarters. And Q4 is usually the time of the year when the companies, especially the bigger ones, delay or postpone their decisions on choosing their services until the beginning of the fiscal year. Additionally, a note in theory, MRR and payments should grow at similar rates but recent quarters have shown much stronger dynamics in payments. Hence, we are witnessing an alignment between these indicators in the quarter that we have now. Good news are on the side of monthly recurring revenues, which reached 7,100,000 US dollars for the quarter in December 2024. This represents a almost 1% increase compared to the previous quarter and 9.4% increase year-over-year growth. Recalling the growth that we got in the previous quarter, which was 8.8%, that's an improvement here. And also monthly recurring revenues are not all the payments that we receive. If we were to calculate also the additional chats that we have in chatbot or API usage fees, including those, the figure will be 7.35 US million. And the increase that was achieved this quarter would be 1%. This growth that we've shown was achieved despite a significant decline in the number of live chat customers. As you can see on that basis, live chat lost 907 customers. And this is of course a very weak result driven by high customer churn and also weak new customer acquisition. This primarily was concerning December. Because until mid-December, we were expecting slightly better results. So in October, we lost about 300 customers. In November, it was slightly over 100. And in December alone, the number of customers dropped by 545 customers net. Although this dropped in the number of the customers, I want to highlight that in December, monthly recurring revenues generated by live chat increased. This was due to two factors and I think it's very important to say because we all concentrate on the number of customers, but also there are some other mechanisms that are behind MRR. So we had a strong upselling and also the structure of customer chain that supports MRR. So the customers that we lost were among the smallest customers, particularly from Asia. If you think about our key market, US, October, November, And also two earlier months were very good in terms of the customer churn. So it was actually at the level of and even below 3% and it only increased in the last month of the year in December. You can also, when we talk about live chat, you can also see that there is a trend in live chat average revenue per license. It's a stable and positive growth of this parameter. In that quarter itself, ARPL increased by nearly five US dollars. And currently it stands at $178.6. So this is something that is important. Also, the average initial ARPL for the whole quarter was higher this quarter than the previous one. Slightly worse news. Now going into chatbot numbers. In this quarter, chatbot customers exceeded 3,000. It was a good month for the product. There was an increase of 72 customers. Especially good was October and November, slightly worse in December. And you can also see on the next slide in terms of ARPL that there was a drop in ARPL This decline was caused by the promotion that we have still. So if the customer purchased the product within the first three days of the trial, they were getting one the first month for $1. And this promotion affects obviously the inflow of new customers, but also it affects ARPL customers. and primarily, as you can see on the graph, initial ARPL. Additionally, in chatbot products, we also have payments that are beyond the subscription. So we have payments for additional chats. And these figures are not record-breaking, but on average, these additional chats add $30 to ARPL for chatbot during this quarter. And now going to the third product of ours, Helpdesk. It's actually the next two slides will be about good news. So we have observed a growth in the number of customers of Helpdesk. This number almost increased by 100 in a quarter as compared to 30 customers a quarter before. And although December was not that good for the previous two products, for Helpdesk actually it was the strongest months. We got a net 61 customers at the end of the quarter and now it's 1,321 customers for Helpdesk products. And there are also more things to come in terms of the Helpdesk product and I'll talk about them slightly later. As you can see, another good slide. So we see that helpdesk ARPL increased almost 11% during the quarter. Sorry, this description is, yeah, okay. So ARPL increased by 10% to 210 US dollar in this quarter. And this reflects two things. First, the value to the customers, because they increase the number of agents that are using Helpdesk. And also that we have more and more and also bigger customers using Helpdesk. As a summary of the results achieved, monthly recurring revenues grew by 9.4% year-on-year, and that is US$7.1 million, and that's actually better growth than a quarter ago, and it was 0.9% during a quarter. And this growth is brought by increased ARPL, and especially due to monetization of the existing customers. The payments that we received this quarter grew by 0.4% to US$21,430,000 and that actually means a drop over the previous quarter. This is actually due to lower share of the payments from annual subscriptions in this quarter, but it is connected to the calendar year, I would say. The next thing from the summary is the high customer churn that we are still experiencing. And on top of that, we also have weaker acquisition of new customers. And that resulted in a decrease of the number of paying live chat customers by 907 this quarter. Whereas December itself was the majority of this effect came in December. However, due to strong upselling, actually live chat product has increased MRR in December. When we talk about the customer churn, it exceeded 4% in the quarter. Usually, as it is the case, the churn was highest among the small customers. When we think about the geographies, the majority was from the Asian customers. When you think about the churn in the key U.S. It is much better. The customers are more loyal. This churn is at a level of slightly over 3%, which is a good sign. Also, we got revenues which are outside of recurring revenues. So the revenues from API as a service, they were at the level of 53,000 this quarter, and they fell by 10% quarter on quarter. I also want to say a few words about our strategy. We want to emphasize that we are in the process of building a suite offering. We have begun this journey quite a few years ago while the one of the last milestones was the rebranding of the company. It's not that we are halfway through this process, as you can see on the slide, but the changes that we are making have accelerated in the recent months. And although the whole suite is not yet visible in ourselves and in the offering, There are good things that will, or steps that we will take and will get us towards this week. So it will be the introduction of the global bidding, which should finish this quarter. Shared trial for our product so that when a customer starts one of the products, he will automatically get the access to other products as well. and also we are now taking away a simple native ticketing system from live chat so the clients will be offered help desk. These developments that will come are also tied to the efforts that we are making in terms of the infrastructure changes, that is also the certification processes, and I mean here SOC 2 certification. Independently of the suite, these things will improve the quality of the product and through that we will be also able to attract better, I mean larger customers in the future. Although I have a second slide titled highlights here, I want to talk about what events also took place in this quarter in terms of the product, in terms of corporate events. The very first thing that took place at the beginning of the year was the payment of our first advanced towards dividend, which was 1.66 zloty per share, which is a higher advance than a year ago. As I mentioned, talking through the process of building suite, We focus on changes in our infrastructure. We improve quality and also fix bags in Q4. Those processes will continue into 2025. We also have added during the last quarter products. One is workflows, which is about automation between the products. It is in a closed beta phase and released to some of the customers. And also we have a second project which is called Team Chat. It's more of a Slack for our live chat agents. And this product is an internal testing phase. During the quarter, we also had our first context So that was our first online event dedicated to our customers. And from the product side, also important thing is that we have a new live chatbot integration, which is one of the steps that lead us to Suite. And in terms of the plans, we are very much focused on building Suite. So as I mentioned, there will be a lot of things happening in that space. There will be certification in the progress that should result in getting the certification by mid of the year. And also we will be strengthening the sales department. We want to focus on bigger deals and also on the US market. So we should be present there regularly on the first conference this quarter and summing up also it's not that we are um in the um ah sorry What I wanted to say is to comment on market conditions. We are influenced by the market conditions which are changing, that is in terms of the customer acquisition. process in terms of how the economy influences our results and also by the changes in the customer acquisition process. So for example, even the fact that people are changing the way that they are looking for information in the internet, so no longer using or still using, but to a less extent, the search engines. So for example, as a result of that, we started to see the first customers coming from ChatGPT. And this market conditions change as always. Important thing here, and I want to direct you to An interesting report, which was prepared by ChartMogul, it's publicly available, so if you need a link, I'm happy to share that, is the fact that most of software as a service companies, including also our competitors, but also other companies from other sectors, but working in SaaS mode, In the most recent quarters, they have relied heavily on revenue retention rather than customer growth for the past two years almost. Often, some of them were losing customers, and it was also tied to the economic situation in the U.S. So this is something also that applies to us, that it is much harder to get new customers. And if you look at our numbers, the number of customers is dropping, but we are able to keep MRR growing. And this is importantly lies on the retention, so on upgrading, upselling the existing customers. And with that note, we're going to open up to questions. Thank you.

Thank you very much for the presentation. I will now be moving to the Q&A part of the call. If you are dialed in via the telephone and would like to ask a voice question, please press star two. That's star two on your keypad. Alternatively, you may ask a voice or a text question via the chat. We'll give a few seconds for any questions to come through. We acknowledge the questions that you've already typed, which we'll get to very shortly. Okay, so the first question is from Mr. Maximilian Rofaga from the family office. Three questions on the live chat customer count specifically. Number one, your customer count for your main product live chat is declining. In your second quarter 2025 update, you stated that you are safeguarding the product against returning customers abusing and made unsuccessful changes to the onboarding in June and July. Could you please elaborate on what exactly do you mean by that? You also mentioned in your Q3 2025 KPI update that subscription plan optimization has caused slower customer growth. Could you please explain what those optimizations were and why they caused the decline?