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

Hello, everyone, and welcome to our Q3 FY '25 update. I am Matteo Trinca, Joint CEO of Cluey Learning and Code Camp. This quarter marks a pivotal moment for us. After 2 years of disciplined cost cutting and restructuring, we're seeing strong signs that the business is returning to growth. In March this year, we achieved top line revenue growth for the first time in 2 years, a key milestone for us. Whilst taking a little longer than we initially anticipated, we are on the path to achieving profitability. Looking at the numbers. In the last quarter, new students increased by 24% compared to the previous corresponding period, reaching over 10,900 across our business. In particular, we experienced strong growth in new students in our tutoring business. Even more encouraging, we achieved this growth with just a 5% increase in acquisition spend, bringing our customer acquisition cost down to a record low of $168 per student, a 7% improvement on the PCP. This demonstrates not only that we're growing, but also they were growing more efficiently. Our gross profit margin of 55% showed a slight decline, something we will discuss a little later in today's presentation. And we have continued to improve our underlying EBITDA loss, which reached $1.7 million this quarter. We know more work lies ahead to ensure ongoing and consistent improvements in our results. We remain optimistic about our return to sustainable top line growth and importantly, achieving profitability in the near future. I'll let Greg take you through our financial performance before returning to discuss the operational highlights of the quarter and the outlook for the second half of the financial year.

As you can see from this chart, in Q3 FY '25, the underlying EBITDA loss of $1.7 million was a 7% improvement on the prior corresponding period. EBITDA performance improvements have been consistently achieved over 11 consecutive quarters compared to the PCP. It is important to note that Q3 financial performance reflects the seasonal increase in customer acquisition investment during the peak enrollment period, which coincides with the beginning of the academic year. When we compare Q3 FY '25 versus the PCP, a 5% increase in customer acquisition spend delivered 24% growth in new students. This is encouraging, particularly for the online tutoring business as these new students will now start to offset the previously declining active student base. Matteo will discuss this in more detail shortly. In Q3 FY '25, more students paused their tutoring for longer during the summer holidays, partly as a result of the extension of school holidays in New South Wales. While this impacted the recommencement date and Q3 revenue, the company experienced a higher resumption rate in Q3 than in the previous 2 corresponding periods. Gross profit margin declined from 58.2% in Q3 FY '24 to 55.3% in Q3 FY '25, primarily due to an increase in the number of customers opting for lower-priced but higher commitment payment plans and due to a 5% increase in tutor and instructed costs. The company has several initiatives underway to improve margin going forward. Finally, it is worth noting that the increased investment in customer acquisition in Q3 of each financial year typically delivers improved financial performance in Q4. As you can see from the chart on the left-hand side, quarterly cash burn has improved consistently over successive quarters compared to the prior corresponding period. Cluey has now delivered 11 consecutive quarters of improvement in cash burn compared against the PCP. In the third quarter of FY '25, cash burn improved by 46% to $1.2 million compared to $2.2 million in Q3 FY '24. The chart on the right-hand side illustrates cash payments in the blue line and cash receipts in the yellow line over the last 11 quarters. What is important to note is the narrowing of the gap between receipts and payments, particularly over the last 12 months compared to previous periods. Initiatives implemented in FY '23 and FY '24 have delivered significant ongoing cost reductions in payments as the company focused on disciplined cost-cutting and restructuring. In Q3 FY '25, cash payments decreased by $849,000 or 10% compared to the previous quarter, demonstrating the continued focus on cost management and reducing operating expenses. This compares to an 11% decrease in cash payments in Q3 versus Q2 in FY '24 and FY '23. What is very pleasing to see in Q3 FY '25, cash receipts increased by $613,000 or 11% versus the previous quarter. This compares to a 1% increase in cash receipts in Q3 versus Q2 in FY '24 and a 3% decrease in cash receipts in Q3 versus Q2 in FY '23, demonstrating the return to cash receipts growth year-on-year. We remain optimistic that Cluey will deliver improved cash flow performance in Q4 FY '25.

Thank you, Greg. Let's dive into our operational performance. Earlier this year, we were pleased to announce that in Q2 FY '25, we returned to a modest 2% positive year-on-year growth in new students. In quarter 3 FY '25, our most important quarter when students return to school, this momentum has accelerated significantly. We achieved a 24% year-on-year growth with over 10,900 new students commencements. This growth was driven primarily by our tutoring business and strong performance in the U.K. [ while ] new students in other business units remain steady. On the cost side, we have continued to improve efficiency. Our variable customer acquisition cost dropped by 7% to a new record low of $168 per student, down from $181 in the previous corresponding period. This efficiency improvement allows to increase our investment in customer acquisition to further accelerate our growth. This progress reflects the hard work we've put into repositioning the business for growth and achieving our pathway to profitability. In our last update, we noted that year-on-year revenue growth was still negative but starting to ease. I'm pleased to share that this positive trend has continued. Over the past 4 quarters, our year-on-year revenue growth has improved from a decline of 32% to just 6% this quarter, reflecting steady and consistent progress. More importantly, March 2025 marked a significant milestone for us. We achieved positive top line growth of 2% for the first time in 2 years. While this growth in revenue is modest and trails our new student growth, we are confident that the changes we've made, namely our ability to acquire students cost effectively and ongoing improvements to the user experience will drive stronger revenue performance going forward. We're also seeing positive trends in student enrollments and retention, particularly following the summer holidays. As we shift back into growth mode, we're increasing our investment in customer acquisition, marketing and sales to further accelerate this momentum. Our focus is now also shifting to product expansion and innovation to secure our upward trajectory. In conclusion, while we are proud of these successes and key milestones, we remain focused on delivering sustainable growth and profitability in the quarters ahead. Thank you for your time and interest in watching this presentation. If you have any questions about Cluey's Q3 FY '25 financial performance, we encourage you to submit this using the Ask a Question feature in the Cluey Investor hub.