Cluey Ltd (CLU) Earnings Call Transcript & Summary

Welcome, and thank you for joining us. I'm delighted to share Cluey's key achievements for quarter 4 FY '25. This quarter marks a pivotal milestone in our journey. Cluey has delivered its first ever positive operating cash flow of $0.5 million. This represents a $1.6 million turnaround compared to the prior corresponding period. We have achieved $6.7 million in revenue. And despite a modest 2% decrease year-on-year, our gross margin remains solid at 57.4%. Underlying EBITDA improved 14% to a loss of $800,000, while new student enrollments grew to 7,455, which is a 1% increase on PCP. Student sessions reached 117,000 and our variable CAC per new student was $210, reflecting strong marketing efficiency. These results validate our strategy of disciplined cost management and renewed investment in student acquisition, which is now delivering sustainable results. I'll now hand over to our CFO, Greg Fordred, to discuss our financial performance in more detail.

Hello. I'm Greg Fordred, Cluey's CFO. It's my pleasure to provide an update on Cluey's financial performance in Q4 FY '25. As Matteo mentioned, Q4 FY '25 marks a pivotal milestone in our journey. Cluey has delivered its first positive quarterly cash flow result, a net cash positive result of $341,000, representing a $1.6 million improvement compared to the prior corresponding period. The chart on the left provides an overview of our quarterly cash flow performance over the last 3 years. The shift to positive cash flow is the result of our ongoing and disciplined financial execution. After 2 years of cost optimization, FY '25 has seen us shift back to growth. Looking at the chart on the right side, Q4 cash receipts rose 32% quarter-on-quarter to $8.5 million, the strongest quarterly performance in nearly 2 years. At the same time, we maintained strong expenditure discipline. Although marketing and product investment increased quarter-on-quarter, total payments declined 9% compared to PCP. This is a delicate balance. We are investing to grow while improving cash dynamics in order to deliver sustainable revenue growth, positive cash flow and long-term profitability. What's particularly noteworthy is how our cash flow performance has significantly outpaced EBITDA improvements. In FY '25, we improved net cash flow by $6.1 million versus a $2.2 million improvement in underlying EBITDA. This divergence reflects better trading and improved operational performance, less capitalization of employment costs, lower restructuring expenses and a more stable working capital cycle. Capitalized costs and one-off restructuring payments were $1.3 million lower. Accounts payable balances reduced from $2.4 million to $800,000 over FY '24. And deferred revenue increased by $400,000, driven by increased customer prepayments resulting from students committing to longer-term plans at a higher average price. Collectively, these factors underscore the improvement in our operations and the effectiveness of our cost and working capital controls. Turning to student acquisition. 7,455 new students commenced in Q4 FY '25, a 1% increase from the prior corresponding period. While modest, this growth is consistent with our steady performance improvements throughout FY '25. It also marks a return to growth. Our variable CAC increased slightly to $210 and remains well within our efficient acquisition range. Each student we acquire adds more to revenues than to costs. This supports our ability to scale student acquisition further. As you can see in the chart on the right, we have consistently reduced the decline in revenue growth throughout FY '25. Our strategic decision to now increase investment in product to enhance customer experience and marketing to scale customer acquisition, positions us well for growth in FY '26. I'll now hand back to Matteo to provide a business update.

Thank you, Greg. Over the past 7 years, Cluey has navigated 3 key phases: a foundational phase to launch our first product quickly followed by rapid growth enabled through deployment of capital. The most recent phase has been about reaching profitability through a focused approach. In FY '18, we laid the groundwork by assembling our funding team, developing our first product and releasing alpha and beta versions to the market. We launched our initial one-to-one online tutoring solution in the Australian market, setting the stage for what was to come. From FY '19 to FY '23, we deployed a growth-first mindset phase. We gained access to capital through our ASX listing. We acquired Code Camp, in the period, we delivered 157% CAGR in revenues. We proved market demand, scalability and product market fit. From FY '23 to now, we have adopted a breakeven first mindset. Through careful cost management, revenue optimization and a lean, adaptable organization, we have improved from an $18 million annual cash burn to achieving our first ever positive operating cash flow in quarter 4 FY '25. As we rescale the business to breakeven, we experienced a decline in revenues. This decline has now ended. We have taken the business to breakeven and are now ready to resume growth while maintaining profitability. Cluey is entering its next chapter, sustainable innovation-led growth. We are transitioning from a foundation of operational efficiency to strategic expansion. The time line builds naturally on our past. We are embracing a sustainable growth mindset. We are pivoting to expansion, leveraging product innovation, distribution reach and AI-driven improvements. The strategic shift is not just timely, but a long-term value driver as Cluey evolves from a services-based provider to a comprehensive AI-supported learning ecosystem. We'll achieve this growth through customer-centric levers, building on everything we've learned to date. We have identified multiple opportunities that we now want to focus on; product innovation, distribution expansion and AI-driven disruption. First, product innovation. We're introducing new learning experiences to enhance customer value. Over 50% of customers who leave us do so not due to dissatisfaction, but because we have delivered the results they came for. However, Cluey does not have an extended range of education products and services for students to consume behind our core online tutoring offering. And where friction exists, it tends to center on user experience. So going forward, additional products and improvements to our user experience are clear priorities. Second, distribution enrich. We're expanding into new learning domains and multichannel delivery, including offline. The acquisition of Code Camp validated this approach. Novel learning programs such as game development and AI applications offer high potential growth with minimum cannibalization. Our data also shows that around 15% of prospective customers still prefer offline learning. That's why we want to become an omnichannel provider. Omnichannel customers are more valuable to us. By providing flexibility for customers to switch channels over time, we can generate higher LTV and margin. Expanding learning domains and adding an offline offering are key elements of our growth strategy going forward. Third, AI-driven disruption. Our data is our edge. We hold data from nearly 2 million sessions. That's 120 million minutes of recorded tutor-student interactions, including audio, video and content engagement data. This is invaluable for calibrating AI to support human-led teaching for school age learners. We have already launched AI features like Cluey Coach, our HSC AI tutor and integrated AI into our customer and service operations. Many more AI-driven products and features designed to meet our customer needs are in the pipeline. Clearly, there is still much work ahead, and we're balancing speed and quality. Our approach is to iterate quickly through alpha and beta releases, gathering real user feedback to refine our products and services before scaling and monetizing. Going forward, we will focus our market updates on our growth strategy and product innovation road map. Our vision to become disruptive force in school age learning is gaining momentum. We are well positioned.