Cluey Ltd (CLU.AX) Earnings Call Transcript & Summary

Our first quarter of FY '25 has delivered performance in line with our expectations, driven by strong cost management and consistent top line performance, particularly in our online and U.K. business units. Greg Fordred, our CFO, will provide more details on these in his financial update. At the beginning of 2025, we detailed our plan for the fiscal period and outlined our path to profitability. We remain focused and committed to executing on these priorities. Our key achievements in the first quarter are as follows: our online business unit has successfully improved the performance. We previously saw declining revenues, primarily due to reduced marketing investment as part of cash preservation measures implemented in 2023. Given improvements in CAC and other key metrics, we're now focusing on preparing for growth in this business unit again. An early indicator of this is our year-on-year new student performance, which has been declining since January 2023. However, as of September of this year, we've closed the gap, and are now flat year-over-year. This improvement was achieved despite a year-on-year reduction in acquisition spend of [ 51% ] in September. Our [ bootstrapped ] U.K. business unit has been bolstered with additional personnel, including some staff transfers from our Australian business to [ cope ] with the ongoing growth and demand for our services. Although we've faced some initial challenges in launching our [indiscernible] accounts in the U.K., our top line growth remains robust, driven by our after-school product, which achieved significant year-on-year growth in the first quarter of FY '25. Our first AI-powered learning product is nearly market-ready. This AI-powered tutor is designed to support senior students in the New South Wales curriculum by assisting them with HSC exam practice. Our virtual tutor interacts with students and analyzes the work based on a single digital picture, guiding them through problem solving steps rather than providing complete answers, ensuring a more interactive, supportive and valuable learning experience. This beta release of our virtual tutor marks our initial journey into AI-powered education, with plans to expand into other states and younger age groups in the coming quarters. I think it's important to reiterate our view of how AI will be deployed to support our students and how it will integrate with our existing live online learning. AI is good at handling routine task, providing instant help 24/7. Human teachers and tutors focus on teaching and explaining concepts, providing comprehensive feedback, bridging learning gaps and bringing empathy and credibility and the ability to inspire students through mentorship and personalized attention. This is especially important for younger students. These are all important learning elements that AI cannot replicate. We believe the future of great tutoring and teaching lies in combining AI and human expertise, where we leverage each other's strengths. AI will not replace teachers, tutors, schools or textbooks. While AI enhances and personalizes the learning experience, it cannot replace the invaluable role the human tutors and teachers play. By integrating digital interaction data, including online and offline session data coupled with student and prime feedback, we have what we call a student state. While leveraging the power of AI, alongside our skilled human tutors, we're able to deliver a more personalized, engaging and effective learning experience. The progress made in Q1 and over the past 2 years has enabled us to achieve our best quarterly EBITDA and cash burn performance, and we're well on the way to achieving profitability. I'll now turn to Greg to take you through some of the details of our financial performance. Thank you.

As Matteo mentioned, the hard work completed over the last 2 years in transforming the business is paying off, as indicated in Cluey's most recent quarterly financial performance. The graph on this slide illustrates the improvement in underlying EBITDA achieved in the first quarter of FY '25 compared to the prior corresponding period. In the first quarter of FY '24, Cluey delivered an underlying EBITDA loss of $2 million, as indicated by the gray bar on the left-hand side of this chart. In the first quarter of FY '25, Cluey achieved an underlying EBITDA loss of $0.5 million, as indicated by the gray bar on the right-hand side of this chart, an improvement of $1.5 million or 75% compared to the prior corresponding period. So what were the key drivers of this improvement? The first thing to note is that revenue decreased by $2.5 million. This was primarily due to management's strategic decision to reduce customer acquisition spend and prioritize cash preservation ahead of growth. The decision delivered a marketing cost saving of $1.7 million. However, it is important to note that the net impact from the $2.5 million reduction in revenue was a gross profit reduction of only $1.4 million, given the $1.1 million saving in direct tutor and instructor costs. The decision to reduce customer acquisition spend has also focused Cluey on implementing further sales and marketing optimization initiatives, resulting in a 49% improvement in CAC per new student in quarter 1 of FY '25, down to a record low of $168. Importantly, at this level of CAC, we are now returning to growth in new students, noting these students are delivering positive earnings and cash flow. The continued focus on optimizing the business and the implementation of further cost-saving initiatives during FY '24 resulted in additional savings of $800,000 in employment costs and $500,000 in admin and other costs in the quarter when compared to the prior corresponding period. The benefits from these cost-saving initiatives and a continued disciplined cost management approach will likely continue to deliver cost savings in FY '25. The transformational changes implemented over the last 24 months continue to drive the company towards profitability. As you can see from the chart on the left-hand side of this slide, the EBITDA performance improvements have been achieved consistently over successive quarters when compared to the prior corresponding period. Cluey has now delivered 9 consecutive quarters of improvement in EBITDA, and in the most recent quarter, the underlying EBITDA loss fell to $500,000, demonstrating that the company is moving much closer to achieving profitability. The right-hand side chart illustrates the underlying EBITDA loss for the last 9 quarters, and clearly demonstrates that by maintaining this curve's trajectory, Cluey is on track to achieve quarterly profitability during FY '25. In the first quarter of FY '25, Cluey delivered a significant reduction in cash burn for the same reasons that we delivered improvement in underlying EBITDA. Total cash burn in the first quarter of FY '25 was $600,000, an 81% reduction from a $3.3 million cash burn in the prior corresponding period. At the end of September 2024, Cluey had $8.2 million cash in the bank. This amount of cash is considered sufficient to support working capital requirements until Cluey achieves sustainable positive cash flows, and importantly, provides additional growth capital to be invested in initiatives to accelerate growth. Consistent with the previous underlying EBITDA slide, the right-hand side chart illustrates the cash burn for the last 9 quarters. This demonstrates that by maintaining this curve's trajectory and continuing to achieve improvements in business performance, Cluey is on track to achieve positive quarterly cash flow performance and profitability during FY '25. If you have any questions about Cluey's first quarter of FY '25 financial performance, we encourage you to submit these using the ask a question function in the Cluey Investor Hub.