AF Legal Group Limited (AFL) Earnings Call Transcript & Summary

Okay. Thanks to everyone for joining us here today to talk through the last part of our journey. [Operator Instructions] So we'll start with a quick highlight slide for FY '25, and then we'll drill into the detail on that in some of the slides that follow. So I think the first line there, FY '25, our revenue was up 27% on the prior year. And obviously, there's a lot of positives in that statement, and we'll get into that in the subsequent slides, but yes, 27% is pleasing growth. And similarly, with our normalized net profit before tax attributable to the owners of AF Legal Group, the FY '25 number is $1.4 million, again, a pleasing number for us, up $600,000 on the prior year or 77%. So we will get into all of those in a lot more detail in the slides that follow. A couple of -- a few of the other things that obviously were the big events of FY '25. The acquisition back in October '24, so towards the end of the first half, of Armstrong Legal Criminal and also a small family law practice that they had as well. And along with that came the armstronglegal.com.au website, which is quite a traffic driver and a lead generator for us, which we acquired. So I come to you today actually from the relatively new Armstrong Legal office. So this is a combined office in the Sydney CBD, not that you can really see too much out the window other than a bit of blue sky, which hopefully is a positive sign. But we have a nice, combined office here for the contested wills and estates and criminal law teams who are based in Sydney. Obviously, we have operations elsewhere. Since that acquisition as well in terms of the criminal law business, the criminal law business when we acquired it was solely a New South Wales-focused business run out of Sydney. We have since expanded into 3 new locations. So we have appointed leaders in Victoria, in Melbourne and in Brisbane and in Canberra as well. So we are now an East Coast business, which is sort of taking Armstrong Criminal Law back to what it was in better days, I guess. It had contracted through previous ownership and found itself just a Sydney business, but it had -- it's starting to grow back, and that's something that we'll get into in later slides as well. Our cultural transition to one that is people-first focused and practice-led, and we would have touched on this at the half year, but we have done our second Great Place to Work survey. So you'll recall that the first one we did around the time of the management change was 53%. So relatively sobering level there at that point. But a little over a year later in October '24, it was 84%, which does qualify you as a great place to work is one of the positives. And we are about to do it again. And we'll touch on the benefits of that on later slides because it does -- it's one thing what it does internally, but I think also our appearance to the external stakeholders, I think, is also very positive as well. And the other thing, the other big highlight or ongoing highlight, if you like, for FY '25 and beyond is Project Titan. So Project Titan, as you may recall, is the replacement of a modern cloud-based version of our practice management system and our document management system with all of the AI benefits that those new systems will bring. You'll see in some of the subsequent slides that the cost of those projects -- of that project is starting to come through, and then we expense it as we go along, but it is something that is normalized in some of the numbers that follow. So moving ahead. The next slide is really just our snapshot slide, if you like. So you look at -- we look at our revenue and our weekly sales -- weekly revenue, rather, sorry, and our net profit before tax over the various halves for the last little while. And I think if you look at all of those graphs, they're all trending in the right direction. So it's looking quite positive and building quite nicely. I think that you see in the -- and again, we're going to drill into these slides in a minute. You'll see that the revenue half-on-half, you really see that there's an acceleration in the in the last financial year. And obviously, that is -- Armstrong plays a role in that, be it the contested wills and estates business, which was acquired back in April '24 or the criminal law business in October. But it's pleasing to say that some of the growth in family law more recently is exciting us as well. Looking at that average weekly revenue. Again, it's something that we'll get into in a little bit more detail, but above $600,000. So a very pleasing number for us. And equally, the last one, which is our normalized net profit before tax. So the number of $1.4 million or thereabouts for FY '25. And the other pleasing aspect of that is to see the lift half-on-half. So you see second half $821 million, up on $561 million. So a nice growth there, which again, we'll talk about in a minute. Looking at the revenue here, and I think the number of $27.6 million for the year is a significant number from where we were a little while ago. So we started back in FY '22 around a $17 million number, $19 million in '23, getting close to $22 million in '24. And now we're up $5.9 million or 27% on the prior year. So a nice growth there. If we were to exclude the Armstrong impact, and we do that there or the noncomparable impact because obviously, at some point during that, the contested wills and estates business became comparable in the final quarter of the year. But excluding that Armstrong impact, that increase is more like 11%. Looking at the revenue trend of 27%, FY '25, as I say, up 27%. The first half was up 19% and the second half up 36%. So again, those halves just showing that the momentum is really starting to build quite nicely. Moving on to our average weekly revenue, which is an important metric for us and one that we -- yes, it's one of the first things that we look at each week. So Q4 lifting to $605,000 per week, first time above $600,000. But obviously, quarter 4, it's a quarter, so it's 3 months, but it also includes Easter. So Easter is a slower period. So with the $605,000 across the quarter, that gives you a pretty good indication that we actually pushed a fair bit higher than 605 in the latter part of Q4. So May, June were higher numbers. I think it's important also to call out that in those numbers, obviously, Armstrong plays a role, and we talk about that, we talk about the fact that even in quarter 4, we have Armstrong contested wills and estates becoming comparable and their comparable growth quarter-on-quarter, like quarter 4 relative to the previous quarter 4 was 14%. So good growth in Armstrong contested wills and estates and also the criminal law numbers feeding into the back half of that graph. But I think it's also very important to call out, and we'll talk about the reasons in a minute, family law. So family law in the first half of FY '25 grew at 1.6%, so pretty flat really, but it has really accelerated in the second half. Quarter 3 was up 18% and quarter 4 up 24%. There's a little bit of assistance there from the family lawyers that we added from Armstrong, of which there was effectively 2.5 lawyers. I know how do you have a half lawyer, but obviously, they don't work all the time, some of our lawyers. So 2.5 lawyers. But what we have done in family law, and I think this really speaks to the impact of the cultural change in our organization, our ability to attract lawyers has really, really changed, I would say, in calendar '25 in a big way. I think that we are finding it easier to attract people into our organization than we had previously. And I think also on the other side, the people that we have in our organization, I think we are retaining people very well as well. I think the number of people leaving us, there always will be people leave for varying reasons and personal reasons and all sorts of things, but it's definitely lessened considerably. We've probably added around 8 or 9 lawyers in family law since the end of quarter 1. So it's a 20% increase. And I think those trends as well have also been apparent in the Armstrong legal businesses. So obviously, growing criminal law down the East Coast. We're attracting people there and also adding a little bit to the teams in the contested wills and estates teams, although some of those new lawyers in those teams are ones that we've generated ourselves, if you like. So they are people who have been admitted and young lawyer -- they now move into young lawyer roles. So very exciting for us to have people coming through and a lot of progression. And I think that, again, we promoted in June, July this year, we promoted another 20 people, and that's the real key for us to really be developing our own people. And that's something that is giving us a positive sort of vibe through the whole organization. And yes, the people coming into our organization are letting us know that they're hearing good things about us. So that's a real positive, and it actually does -- drives recruitment and recruitment drives revenue. We're growing it on the back of more people. This is a little slide that we include each time is just really to highlight the shift in our organization. So the changes that were made in half 2 FY '23, we're really now looking at 2 -- I know the graphs are a little bit different because some are full years and some are halves, but there are 2 like periods, if you like. So it's the first 2.5 years of AF Legal and then the last 2.5 years. And you can see that from the first 2.5 years, it was a slight loss, around $400,000 at a normalized net profit before tax attributable level with all of the normalizations standardized because just to make sure that it's apples with apples, which it is. And then in the last 2.5 years since the changes, profit of $2.8 million. So significant improvement. I think we definitely want to be a lot higher than that, and we are heading in the right direction. And equally, over that period, I'd say, over the last couple of years, our revenue, which is now $27 million, $28 million is up around $9 million or 50% in the last couple of years. So again, very positive momentum in our organization. Drilling a little bit into the normalized net profit before tax attributable, which is what -- when we read underlying profitability, it's the same thing. Again, same graph down the bottom, but just a little table there breaking it out. And again, showing that FY '25, as I mentioned previously, up $600,000 or 77%, up to $1.4 million. And another pleasing aspect of that result is the split between half 2 and half 1. So half 2 saw the profitability or the normalized profitability up 46% on the prior half at a time when the revenue was up 17%. So I think that's a really important thing for us to call out because our whole growth model is built around gaining scale and leveraging our cost base. And I think you're starting to see that, that operating leverage that we always talk about is really starting to deliver improving returns for our organization. The normalizations are included there, but they're also on subsequent slide as well. So I will -- as my voice starts to fail me, I will just flick on to the next slide, and Stace will take us through the next couple.

Great. Thanks, Chris. So we'll look at the actual statutory position. And on the P&L, Chris has already mentioned our underlying profit, but the statutory position reflects a $0.1 million position after tax net profit. And obviously, that's down and heavily impacted by those normalized one-off expenses. I think the exciting thing is around that Project Titan space and the opportunities that, that's going to bring to -- to further bring to bring our bottom line through efficiencies, time and cost, and we look forward to sharing more of that when we get there. Chris, you've got control. Sorry for the pause.

Yes, apologies, Stace. There you go, sorry.

That's all right. There we go. No problems. On the balance sheet, it's relatively flat. There is a small drop in the net total assets. And mostly that, as we can imagine, has been driven through a small drop in cash with all the extra costs that we've been funding. So it's a $0.1 million drop in the cash and cash equivalents. There's an increase in trade and receivables. Naturally, with an increase in revenue, we're going to see some increase in that area, but we've had 27% increase in revenue and yet we're only seeing a 16% in that [indiscernible] debtors area. And obviously, as always, those balances are reflective of some timing on when we raise bills and collect because of the payment arrangements, the secured payment arrangements that we have. Intelligent -- not intelligent. Intangible assets and borrowings also increased as a result of the acquisition with Armstrong Legal, seeing that $2.6 million increase, and it was funded through additional borrowings from the existing NAB finance facility. So we saw borrowings increase by $2.9 million. Part of that was also some borrowings in relation to further support for some working capital. We had some payments, including deferred consideration payments in the year on top of some of those one-off costs. Cash flow, we had a strong operating cash flow inflow finish at $2.9 million, which was, again, a reasonable result considering the outflows. And then the investing activities, $3.6 million outflow. Obviously, that was the acquisition and the first earn-out payments in relation to the first acquisition, which was in the prior financial year. and then the final payment for Kordos. And so we now only have a one final payment, the second installment payment for the first acquisition in Armstrong to come in the current year, and then we're clean in that area. Overall, the financing activities, we had an inflow of $0.6 million, obviously, from those borrowings, and we had the normal lease liabilities. And we took on 2 new leases this year. One was for the new Armstrong team, which is the office Chris is in now and then the new office for Perth, which we're seeing some really good activity in Perth, and so that warranted a new office over there. So overall, we finished a small outflow of cash for this current year of $0.1 million.

Thanks, Stace. Appreciate that. Just moving on to the last couple of slides, and then we'll quickly get to the questions. This focus and outlook slide is something that we always include and a lot of it is constant. It doesn't change from period to period. But the changes, I guess, are denoted by the blue text, and we'll just go through those relatively quickly. I won't dwell on the ones that haven't changed. Great Place to Work, 84%, up from 53%. I think we've sort of already talked about that, so I won't go into that in any more detail. Millie, I think the movie Millie is -- it's a film put together by Darren Mort, who is a barrister in the family law space and very well connected throughout the family law community, if you like. And that movie has been extremely well received in our role as executive producer and sponsor of that, we have launched a -- we've undertaken a number of launches in various locations. We do that often in conjunction with Just Fund, who are also a sponsor of the movie as well. And I think that the reception in Melbourne, Sydney, Brisbane and Darwin where we have done those so far, it's been exceptional. And I think you only have to be in the room when that actually -- when the movie is on and then the discussions that follow and then maybe around a few drinks afterwards. I think that it's really presenting our organization in a very favorable light in the legal profession and in the family law and associated sort of areas as well. And I think that the reaction that we are getting there is really extremely positive for our organization. Is that driving our recruitment as well? I think it couldn't hurt. It's hard to say whether it is or not, but I definitely do think it is positioning us as a leader in the area of family law. And I think that to be associated with someone like Darren, who is such a quality individual, I think it really reflects on our organization where we are. We're building an organization comprised of quality individuals. So when we associate with people outside of our organization, that quality is really important to us as well. And Darren and the whole team from Millie is fantastic in that respect. So yes, it's really -- it's a real positive for our organization. Talking there about SEO as a driver of digital lead flow. And I think that the trends there are positive. Our leads are up 46% year-on-year. The cost per lead is down. It's down 23% per lead. So obviously, leads growing, the cost per lead dropping. And we -- over 26,000 people reached out to us in financial year FY '25. So that's a big number. I don't have the previous year in front of me. From memory, I think it's 7,000, 8,000 people, but don't hold me to that. But the capability -- the SEO capability on the back of the Armstrong legal website has really lifted for us as well. So it's a real positive for us. I'll just flip to the last one there. So growing existing practices through increased recruitment activity. Obviously, I've talked about that in relation to family law that we are growing and our family lawyers grew by 20% in the last, I guess, 9 months or thereabouts and continue to grow. Even into the current financial year, we've had people join us and even a couple still slated to join us in the coming weeks. So the trend is continuing. And in terms of particularly the criminal law business, as I mentioned, we now have leaders on the ground in Victoria and Brisbane and also in Canberra as well. So we are now an East Coast business. And I think the growth prospects for criminal law are very positive. And I think that we continue to work on our new calls -- new client inquiries, and I think to enhance the way that they are dealt with. And I think that, that will even give us greater lead volume coming through to that -- to the criminal law division as well. So I think a big year ahead for criminal law. The last one that's on there as well. My voice seems to fail as I'm about to throw to Stace. So just in relation to Project Titan. So I just get you to just have a quick update on Project Titan, Stace, while I get myself together.

A sip of water, no problem. Thanks, Chris. And Project Titan is just getting more and more exciting each month. We're on budget, and we are probably a few weeks behind the project time line, but we are very much aiming to still go live well before the end of the financial year. And every week presents itself new opportunities and efficiencies that we've been hoping for and we expected and they're being translated into the design of the systems that we're building. When we first engaged these particular suppliers for Project Titan, it was to be a long-term partner and be able to provide our team those types of new age functions and capabilities that would see us, especially in this changing world with the introduction of AI. And we recently attended one of the major suppliers roadshow in relation to what they're doing to keep up and stay ahead of the competition. And we're very excited with the AI functionality in all 3 of the key suppliers to this new platform. And new functionalities are actually being rolled out throughout the life cycle of the project. So I've got a new -- I've got another meeting on Monday with a new initiative from one of our 3 suppliers. So we're very excited about the opportunities that are going to arise. Obviously, we're needing to be smart and considered about all of this to ensure that we're meeting all of our regulatory obligations and privacy and security around our client information. So we're doing it smartly. But at the end of the day, there's no doubt we're looking forward to sharing all of these new efficiencies with the wider business. So we look forward to telling -- giving you a further update at the half year.

Thanks, Stace. I've recovered. Angela, our Head of Criminal Law just brought me a glass of water. So I'm back in good shape. So just on the last slide, our growth strategy slide. And again, as you'd imagine, a strategy slide doesn't change that much period to period. But what has changed or the things that have happened in the last little while, again, are shown in blue. Most of them, I think we've really been through. So I'll leave them there for you to review at your leisure. But -- and I'll read them in no particular order, but obviously, the Armstrong Legal Criminal Law acquisition in October '24, bringing with that also the website, the Armstrong Legal website and also a smallish team, if you like, in Family Law, which gave us a little bit more scale in Family Law in the Sydney office. In terms of new markets, I think it's probably been a quieter year in relation to new markets as we've I guess, bedded in the contested wills and estates teams and the criminal law teams. But we have more recently opened serviced office locations in both Geelong and Cockburn. So Geelong, obviously, in its own right, an important city in Victoria just outside of Melbourne also, but also touches down to the Torquay and the coastal communities down there as well, which are pretty thriving areas as well. So good opportunities for us there. And we actually do have a newish lawyer with us as well who is from the area and one of our existing paralegals is also from Geelong as well. So we do have a good connection with the area. And I think that's always important. When you're branching into a new area that you do have someone who does have, I guess, credibility and a connection to the community, the local community. And similarly with Cockburn in WA. So Cockburn in WA sits probably somewhere between Fremantle and Rockingham, so outside of Perth, so south of Perth, but it sort of draws on that area from Frio to Rocky. And I think that we have -- again, we have a leader in our organization there, Portia, who has -- she lives around that area and has real connections through the community and has operated out of that area previously with an earlier organization. So I think good opportunity for us there. So WA becomes Joondalup, which we've had for quite a while. Perth, very small rooms up in Yanchep, which is even further north than Joondalup, and now we move into Cockburn. And then in Victoria, we have obviously the Melbourne office. We have a serviced office in Frankston and also this new serviced office in Geelong, so starting to grow there. And the last little point there is just the future expansion, geographical expansion through leveraging our existing network. And obviously, we're starting to do that. We have already, as I mentioned, those new leaders in the criminal law teams. Our contested wills and estates teams and our criminal law teams interstate actually do reside with our family law teams. So they share offices with them. At a point in time, they will outgrow that arrangement, and we'll need to look for new premises for them at that point in time. But so far, as they grow, it's getting a little bit full in Brisbane, for example. But in Melbourne, we've got a bit of space. So that is something that we will address as they -- as the need arises, I guess. So that's all we have in relation to our presentation. So I think I will throw to our Director, Peter Johns, who I think is looking after the aggregation of the questions. So Pete, if you feel free.

Thanks, Chris. I'll touch on a question that I had e-mailed to me a few days ago. Before I do that, though, there's no actual questions so far in the Q&A. I presume it's working okay. So if anyone does have any questions, put them in there now, and I'll run through them. But we've got a question or an e-mail from Keith [indiscernible], I can see the Keith's on the call. So Keith, thanks for your support and what is a really insightful question. And it touches on a few areas about us whether we would have any interest in investing as a strategic investor in a particular online will and probate type company with a view to betting in a source of future work basically. And he raises that in the context of needing to look at how we guarantee future work given the massive changes that are happening to traditional sources of either paid or unpaid digital work through SEO or direct from websites. And so that -- the idea being that obviously having a book of wills or custody of a large number of wills tends to get you a good chunk of work either through probate work, which we don't currently do, but it's an interesting area. And then if wills are contested, the law firm that's holding the will tends to have a reasonably good chance of being engaged to defend that will. So to answer Keith's question, it was insightful because it's precisely something that we've thought about, Chris and I have discussed with our Head of Estates, Alun Hill. It wasn't a particular one that Keith sent us, but another online we will group by. We probably weren't particularly interested in investing in anything, our capital at the moment, I want to keep towards either debt repayment or buybacks if the share price for low enough, but there would be potential in maybe growing a book of wills. It's sort of complex for these reasons. One -- I've raised this with a number of lawyers around the organization. So firstly, our contested estates team is doing quite well in terms of the amount of work coming to it. It -- obviously, more would be good, but there's a really good flow of work that comes to them through SEOs, through referral work given Alun's particular reputation. And it was again just only 2 days ago listed as a lawyer in Doyle's. In that area of practice, Doyle's has been, I think, probably the most reputable of the sort of lawyer rakings sites. And so in relation to Alun and that kind of work that is coming in. The other area Keith touches on this as well, how is sort of AI affecting the COO. I've spoken to our Chief Marketing Officer recently. The early signs of sort of ChatGPTs and the other engines influence in this area seems to be a reduction in flow to websites, as you'd expect, as ChatGPT tends to answer questions. But that seems to have had no effect on the amount of leads that we're getting through that channel. So we do get leads directly from search, ChatGPT search, whether it be through Google or independently. And at the moment, at least, it seems that we're doing very well in terms of queries put in our areas of law. ChatGPT is seemingly drawing on Armstrong Legal or AF Legal's websites in terms of generating that information. It's smoke and mirrors as to exactly how all that's happening, and that's something we're really closely monitoring. But at least at the moment, that channel work is not problematic. Where -- the thing that's sort of holding, I think, me personally back from this area is, when I've spoken to lawyers, the -- they tell me that we get a lot of requests for can you do my will. And obviously, we could put that capacity in-house. What we tend to do, though, and this is on an area-by-area basis, is the lawyer will generally refer that work out to a wills specialist lawyer in the local area and through that, generate a referral relationship. And what happens is that family law matters in the particular cases I've discussed tend to come back from the wills specialist to our lawyers. And so if we suddenly do those in-house, we would really need to look at how that might affect that sort of quite important flow of referral work, and whether the time and effort of putting in place the capacity to do what is a pretty low-margin work at an initial stage, writing wills and estates planning, is that going to affect some of the referral work coming back for family law? And is it going to be worth it to set up what is a pretty long game. Obviously, you do the will and they need to be waiting 5, 10, 20, 50 years for that will to be executed and work to be generated from a contested estates point of view. So Keith, we've thought about it, and we'll continue to look at it. We're wary about how it might affect the relationships we've built up within the profession. So that's that question. There's no -- hang on. I thought we do have a couple.

There's some questions, Peter, in the chat channel. I'm not sure you've seen that.

Okay. I'll have a look at that as well. There's one in the Q&A, which was, can we get an update on litigation cases x2. So the first of those being the matter relating to our Gold Coast practice is completely finished now. It ended up costing much more than we had initially hoped. It was a matter that stemmed from back in 2022 in relation to a recruitment practice that we would not do anything similar to these days. But it has finished. We wanted to knock it on the head because it was affecting the business, and it has cost more than we'd hoped, but it is completely finished now. The other matter is ongoing to this extent that a lot of legal fees have been expanded through the sort of lengthy submission phase of that. At the moment, the matter is on hold, waiting for a response to submissions. We're not entirely clear where that will go from there. I would say, generally, that matter has less concern in terms of its potential to blow out. Anything can happen in these areas, but there's not a situation where it's -- we're not being sued by another party seeking damages. The financial cost is hopefully less likely to blow out, especially given a lot of the work has now been done on that one. So look, the budgets for FY '26 assume some expense in relation to that matter. So if it went sort of as we might hope, then there was -- there would unlikely to be a need to have any further normalization or one-off costs in relation to that matter next year, but that I suppose can't be entirely ruled out.

I think in relation to the Gold Coast, I just will add this one point in relation to the Gold Coast. Gold Coast is a team of 2 lawyers effectively or has been. And obviously, now they've got through this. They're actually just -- had a new senior associate start in the last couple of weeks and another one about to start. So that team is about to double. So they've got through this -- through the issue, I guess. And they still had a pretty good year in FY '25, but FY '26 looks great because we've just doubled our capacity up there. So very exciting times in the Gold Coast.

Thanks, Chris, I'll throw this one to you. What have been the key contributors to your improved operating leverage?

I think -- just the fact that we are attracting quality people to our organization, I think the quality of the lawyers that we have gained over the last year, if you like, but I'd say particularly in FY -- in calendar '25, it's really ramped up. And we're getting really good-quality people who are hitting the ground running. And I think that that's the real positive. Obviously, our organization is stable. It is mature and people can slot in pretty quickly. So we've had people join us from other organizations and they can quickly become some of our best operators, to be honest. And I think that the quality of the individual is the key to our productivity and ultimately, our profitability. And I think that the people that we are getting on board are exceptional. And I think that our ability to attract senior associates and above of those -- the net age increase in family law, most of it is at that level. So we're getting good quality people through, and that's an important one for us.

I'll quickly answer this one. Could you please summarize the LTIP changes announced? There's no change to the LTIP. It was agreed at the AGM in 2023. We have made slight changes to Chris and Stace's employment contracts insofar as they relate to the ability of the Board to basically have more discretion when it comes to how LTIP and STIP awards are issued. So they're not -- it was essentially a change that didn't mean we were completely tied down to existing hurdles. There's a question from Fernando, a great supporter of ours from Spain, who I've spoken to a number of times. And he says, I have a question on NPBT margins. They remain stable below 10% of the year, also in H2 despite the strong top line growth and the acquisitions. Can you elaborate more on the year performance? And also, could you comment on your margin expectations going forward? Are they mid-teens or 20% margins achievable? I'll throw to Chris on this one in a second. I just -- it is true they are under 10%, and they're way lower than we hope. They have improved, though, steady improvement. So I think they were 3% last year, and I think they're 5% this year. That may artificially lower a little bit because the revenue number includes the half of Darwin that we don't own, whereas the net profit before tax attributable cancels the profit aspect of that out. But they have improved from 3% to 5%. Chris, I'll hand over to you as to what we aim to get to, if you want to put a figure on that and what might be achievable.

Yes. I do think our initial target is 10%. So I think we are looking at a net profit before tax attributable of 10%. As Pete mentioned, I think it's something like 5% at the moment. But if you adjust for the revenue that's not directly attributable to us in some respects or the minority interest impact on the revenue, it's pushing [indiscernible]. So it is improving. But I do think that equally, the number we [indiscernible] organization in the last 6 or 7 months actually will improve [Technical Difficulty]

Chris, I think you just move the microphone a tad.

Your microphone is a just a bit off.

Okay. Is that better? Is that better?

Yes.