Experience Co Limited (EXP) Earnings Call Transcript & Summary

Good afternoon, all, and thank you for joining us. I am Bob East, Chair of the EXP Board, and I welcome all shareholders and guests to Experience Co's AGM, which is being held as a virtual online meeting. All attendees will be able to watch a live webcast of the meeting. In addition, shareholders and proxy holders will have the ability to ask questions and submit their vote. I've confirmed with the company secretary that a quorum is present and therefore declare the AGM open. Welcome my fellow directors who are also online. Founder, Anthony Boucaut; Neil Cathie; and Michelle Cox. I've also got the CEO and Executive Director, John O'Sullivan, with us. Also online, our CFO, Owen Kemp; Cameron Hume, Partner of the RSM, which is the company's auditors; Sandra McIntosh, the company's secretary; representatives from Boardroom Limited, the company's share registry; and Boardroom-Media and Lumi Technology, who are facilitating the online meeting today. Before I move on to the format (sic) [ formal ] part of the meeting, we have a slide explaining how the voting will occur. And you'll see that there's a button at the top of the screen, and then you select the direction of the way in which you'd like to cast your vote. That will then change color and automatically be cast as a vote. Questions can also be submitted online at any time. For those shareholders that wish to ask a verbal question and audio questions facility is available during the meeting. To use this service, please pause the broadcast on the Lumi platform and dial the number shown on the main information page, which is circulated along with the notice of the meeting, and your meeting ID followed by #. You will be asked for a participant PIN, however, simply press # to join the call. To ask a question, press *9 to signal the moderator. Please include your name and the organization you represent along with your question. Once your question is answered, your line will be muted. Feel free to either hang up or stay on line. For additional questions, press #9 to signal the operator. For those shareholders who wish to submit a written question, please select the messaging tab at the top of the Lumi platform. At the top of the tab, there's a section that you type -- where you type your question. Once you have finished typing, please click on the arrow symbol to send. You may submit questions online at any time during the meeting. I will address questions as I move through the respective items of business. I will also consolidate questions that may be for one of the topics. I encourage shareholders to submit their online questions as soon as possible. Voting today will be conducted by way of a poll on all items of business. To provide you with enough time to vote, I declare the poll open, and you may now vote on all resolutions. Before I move to the formal business of the meeting, I'll provide a brief overview of FY '21, and then CEO, John O'Sullivan, will expand on the year and the outlook for FY '22. So FY '21 was another extraordinary year not only for the Experience Co but on a global scale with COVID-19 impacting the tourism industry and our business for a significant part of the financial year. The financial year commenced with the reopening of operations in most jurisdictions, and all experiences were operational by the end of the first half of FY '21. Intermittent lockdowns in key jurisdictions, state border closures and no international tourism impacted trading volumes and the momentum of the business during FY '21. Encouragingly, as state lockdowns and border restrictions eased, domestic demand returned quickly and the business demonstrated its ability to reopen swiftly and capitalize on this demand. We are confident that this trend will continue. A reflection of the impact of the pandemic on the group's earnings. The group delivered underlying EBITDA of $6.8 million in FY '21. Despite the challenges facing the business and industry as a whole, completion of the business simplification initiatives and delivery of the established divestment strategy stood the business in good stead. Together with disciplined cash management, net debt was reduced to $2.8 million at 30 June 2021, ending the year in a more robust financial position than was originally anticipated. Management maintained its focus on positioning the core business to respond quickly to demand -- sorry, quickly as demand allowed. The group welcomed the government initiatives such as JobKeeper in Australia and the Strategic Tourism Asset Protection Program in New Zealand and Queensland Tourism Icon Programs, all of which enabled EXP to support its workforce and retain valuable skills and experiences within the business so the business could return to operations quickly and efficiently in a continuously changing operating environment. Understanding the benefits that improved efficiencies and customer experiences deliver for the business and our customers during the year. The business enhances reservations and check-in processes. Reinforcing the group's dedication to health and safety, an online safety portal was rolled out throughout the business. In addition, the company continues to adopt strict health and safety measures, including those mandated by government, to ensure the health and safety of our employees, customers, contractors and other stakeholders. Acknowledging the significant impact on the community, particularly during the pandemic, the group continued to develop its community support and initiatives, which included partnering with mental health research agency, Black Dog Institute, and Stellar Experiences, which provide experiences for young people with disabilities. The group remains committed to its initiatives to protect and promote best practice, environmental sustainability and minimize the impact of its operations on the environment. Supporting reef generation, the group acknowledges the importance of its ongoing partnership with the work done with Citizens of the Great Barrier Reef. So investing for the future. At the 2020 AGM, I announced that the group had been awarded a $3 million contribution from the Queensland government for the construction of a new pontoon on the Great Barrier Reef. I'm pleased to announce that construction is nearing completion, and the pontoon is expected to be launched in early 2022 calendar year. This project forms part of the Dreamtime Island vision featuring world-class tourism facilities and activities and providing sustainable training and employment pathways for the indigenous people in the region. In conjunction with the Queensland government, EXP's investment in this initiative will importantly attract tourists to the region, and the launch of the state-of-the-art pontoon will be more compelling in postpandemic environment. Harnessing existing capital, skill base and innovation, the development of a unique and much sought after heli skydiving experience over Surfers Paradise in Queensland in partnership with Sea World Helicopters added another unique offering to already popular urban skydiving experiences we have in St Kilda in Melbourne and Langley Park in Perth. Management's focus on product and customer diversification and expansion, growing geographic footprint and increasing earnings capabilities culminated in the acquisition of the prestigious Wild Bush Luxury business in July of '21 and the imminent settlement of the Maria Island Walk business. These acquisitions saw the beginning of the group's premium adventure sector. Although not immune to the impacts of COVID-19, increasing demand for nature-based activities with strong forward bookings demonstrate that these businesses are expected to continue to deliver increased earnings under the EXP banner as domestic and international customers [ vie ] the outdoor activity after extended periods of lockdown. Recapping the most recent developments, I'm delighted to have announced that EXP successfully transacted to acquire Australia's leading operator of zip lining and rope obstacle courses, in tree canopies, Trees Adventures, complementing the group's growing portfolio. Equally pleasing was the support of existing and new investors, including that of the Board and executive key management personnel for the accelerated nonrenounceable entitlements offer, raising a total of $55 million to fund the acquisition of Trees Adventures, including related transaction costs, provide additional working capital and strengthening EXP's balance sheet for further growth in line with the group's growth strategy. Completion of the acquisition is on track for November of this year. As part of the acquisition of Wild Bush Luxury, we are pleased that Founders -- Founder, Charles Carlow, joined the EXP senior management team as General Manager of this sector. On completion of the Trees Adventure business, Co-Founder, Nicolas Dansin, will also join the senior management team. Securing these leaders in their businesses ensures a smooth integration into EXP, continuity of senior leadership of the respective businesses and complements EXP's already experienced senior management team. The senior management team, led by CEO, John O'Sullivan, and the broader EXP team members have continued to demonstrate their commitment and resilience to navigating the business through its most challenging period. They succeeded in maintaining the core business and continue to deliver world-class experiences to our customers while ensuring the health and safety of all team members and customers. Positioning the business for ongoing growth and expansion, minimizing reliance on single markets and improving earnings quality, the recent acquisition of Wild Bush Luxury and Maria Island Walks and the impending Trees Adventures business demonstrates the senior leadership's ability and determination to advance the strategic growth of the business. In terms of outlook, FY '22 commenced with extended lockdowns in New South Wales and Victoria and Metropolitan Southeast Queensland, which will impact earnings into the first half of FY '22. Notwithstanding that external factors associated with COVID-19 may impact operations and volume in the near term, the Board and management are optimistic for the business as restrictions are eased domestically and internationally. Each of the businesses is positioned to reopen operations in line with the easing of restrictions. And recent announcements that New South Wales, Victoria and Queensland borders will reopen prior to the peak December holiday period buoys our optimism. Strong domestic demand following easings of restrictions and border closures and earnings from newly acquired businesses of Wild Bush Luxury and Maria Island Walks and the Trees Adventures to complete in FY '21 expected to provide increasing earnings growth based on normal trading environments. Complemented by the recent acquisitions is one of Australia and New Zealand's leading adventure experience businesses with experienced teams that are best-in-class, EXP delivers world-class unique experiences to our customers. As Australia moves into a living with COVID phase, we expect international tourism to follow. International visitation is anticipated to return from 2022. And indeed from announcements today, it may even be sooner than that as consumers look to countries with frictionless travel and health and safety capability. So on behalf of the Board, I thank CEO, John O'Sullivan, and his senior management team for leading the group through another demanding year. The Board's acknowledgment and appreciation extends to all team members for their significant efforts and commitment to our business during these testing times. Our appreciation also goes to our customers, trading partners, our shareholders and all stakeholders for their ongoing support of the EXP group in these unprecedented times. I thank my fellow Board members for their commitment and contribution to the EXP business during the year. I'm confident that the business will emerge from the pandemic in a position of strength, ready to capitalize on more opportunities in the future. The group looks forward to growing our adventure experiences and delivering shareholder value into 2022 and beyond. I'll hand over now if I can to John O'Sullivan, the CEO of the business, to walk you through his presentation.

Thank you, Bob, and good afternoon, ladies -- or good morning, ladies and gentlemen. If I could start by acknowledging the traditional owners of the land, of which we gather here today, on Gadigal land, the -- both -- and the people of the Eora Nation and Elders past, present and also emerging. It's my pleasure this morning to be able to present to you the CEO's address and trading update for FY '22 as part of our Annual General Meeting. Turning to Slide #8. As Bob reported, EXP traded through some of the most difficult conditions the company has faced in its 21 years of history. And pleasingly, off the back end of a very strong fourth quarter due to the opening up of Australia's domestic borders, we were able to achieve revenue from continuing operations of $44.4 million and an underlying EBITDA of $6.8 million. As we reported during our final results presentation for the FY '21 year, what was most pleasing about our financial performance was the continued improvement of the health of our balance sheet of just over $13 million in cash and cash equivalents and only $2.8 million in net debt. Turning to Slide #9. Two years ago, I was able to present to you a strategic review about the reset of our company. During FY '20 and FY '21, management's focus has been on the simplification of our core business and restoring cost and capital discipline. FY '22 is about continuing this reset. And as we sit here today, we present to you a leaner, a more diverse and expanded group well positioned to take advantage of Australia and New Zealand's reopening thematic from COVID 2019. Can I please move forward to Slide #10? Next slide, please. Thank you. The outlook today is a positive one as we sit here, more positive, I think, than we've seen in the last 4 months as we see a pending recovery across the nation. And there are several reasons why for that. We anticipate strong domestic demand into the summer period, following by, as Bob alluded to, the reemergence of international visitors to Australia as travel becomes less frictionless. In addition to that, the new acquisitions of Wild Bush Luxury and Treetops Adventure means that we are a more balanced group in order to take advantage of this pending increase in demand. And finally, our recent successful capital raising initiative has only enhanced an already strong balance sheet. Can I please turn to the Slide #11? I'm pleased to report that bolstered by recent acquisitions and enhanced efforts with our core business in the Australian tourism market, our portfolio of businesses have never been stronger in their exposure to the Australian domestic audience. Our strategy for this financial year will be built around ensuring we effectively and efficiently execute demand as it returns, as well ensuring that we maintain a well-capitalized balance sheet. We will also continue to work with stakeholders and customers to create mutual beneficial opportunities. Key actions for the focus of management will be, of course, the integration of our recent acquisitions of Treetops Adventure and the Maria Island Wellness Walk and continuing investment in customer-facing technology. Turning through to Slide #12, please. As Bob alluded to, during the course of FY '21, our focus has been on 3 core pillars as we've navigated the pandemic. Organic growth, which is being driven by our investment in our Great Barrier -- new Great Barrier Reef pontoon, which will be operational in the early part of calendar year 2022, and of course, the launch of our Surfers Paradise heli skydive product with Sea World Helicopters through the commitment of the Gold Coast City Council. We have continually invested in our technology platforms, launching the Donesafe platform, a new phone reservation system and also automated check-in to make our customer experiences and our reservation experiences more seamless. And finally, as alluded to by Bob, we've maintained and enhanced our position within the community, working with businesses such as Stellar Experiences, the Black Dog Institute, and of course, the Citizens of the Great Barrier Reef and the Mars Foundation in reinforcing that position within the community. All of this means that we are well placed to respond to the postpandemic recovery. Turning to Slide 13. A key part of 2021 and also this part of this financial year has been our 2 acquisition projects that we've executed in the family adventures segment with the acquisition of Treetops Adventure as well as the launch of our premium adventure segment with -- through Wild Bush Luxury. I'm pleased to report that the Treetops Adventure capital raise was successful. And we are now well into the process of the integration of this business and the sources and the steps to ensure a seamless completion during November 2021. This business will bolster our existing core business portfolio with a direct and local customer more so than we currently have, a national footprint and pleasingly, a growth pipeline that during calendar year 2021 and calendar year 2022, we will make further announcements as to new sites to join the 14 existing sites that Treetops Adventure already possesses. Turning, please, to Slide 14. Whilst not on the same scale, our new acquisition of Wild Bush Luxury and the launch of our premium adventure segment division headed by industry titan, Charlie Carlow, is adapting well to life within EXP, and it has strong bookings for 2022 and also beyond. We are extremely excited about the growth pipeline of organic and acquisition opportunities within this segment, and we look forward to working with Charlie and his team to grow this. Immediate priorities for this segment will be the completion of the Maria Island Wellness Walk, which we expect to be imminent, and of course, preparations for calendar year 2022, in which we expect to be able to take advantage of the reopening of states and territories such as the Northern Territory, South Australia and, of course, Tasmania. Turning now to Slide 15. As we have mentioned, since 2019, the focus of the Board and management of Experience Co has been the strength of our balance sheet and has been a priority for these 2 groups as we've moved forward. But it is now stronger than ever before with a net positive cash position post the Trees capital raise and of course, the pro forma for the Trees acquisition. We now have more embedded cost control and capital management disciplines with the business. And moving forward, as our trading conditions and earnings improve, we look forward to being able to explore further options and optionality within our balance sheet, but always making sure that our net debt to underlying EBITDA ratios are less than 1x. Turning now to Slide 16. Before I hand back to Bob for the formal part of the agenda of today's meeting, I thought it would be prudent to give you a trading update and also outlook. With the protracted lockdowns during quarter 1 of New South Wales and Victoria as well as the associated lockouts of North Queensland and also New Zealand, our earnings for the first quarter -- for FY '22 will be heavily weighted towards the second half of the financial year. Quarter 1 trading during FY '22 was severely disrupted by these lockdowns, resulting in an underlying EBITDA loss of around $3 million. However, with reopening now upon us, we are starting to see the green shoots of positive bookings increasing in the wake of this activity. We, of course, will focus from a corporate activity perspective on the completion of the $55 million [indiscernible] that we completed to fund the acquisition of the Trees Adventure acquisition. And we are also focusing on the completion of the Maria Island Walk completion, as I mentioned before. In terms of our outlook for the business during FY 2022, we are not expecting meaningful travel -- international travel to occur or impact our business during the course of this year. We are, however, very excited about the opportunities that the Australian summer provides, with encouraging signs emerging from the domestic markets, particularly with the reopenings of New South Wales, Victoria and also North Queensland. However, due to the continued uncertainty during this financial year, we will not be providing an earnings guidance for this financial year. In conclusion of my address this morning, I would like to thank the Board of Experience Co for their unwavering support through these very challenging 12 months since we spoke to you last. Of course, to my senior leadership team, we say thank you. And very importantly, to the 600-odd workforce of Experience Co across Australia and New Zealand who once again have risen to the challenge of COVID-19, demonstrating their resilience and commitment to the group, for them, we say thank you for your continued commitment. With that, I will hand -- now hand back to Bob to take you through the formal part of the agenda for the meeting. Thank you very much.

Thank you, John. I confirm that a representative of Boardroom has been appointed to act as a returning officer for the purpose of conducting and determining the results of the poll. I've written advice on the proxies received to date prepared by our share registry. Proxy votes received represent about 78% of the issued share capital of the company. As Chairman of the meeting, I intend to vote in favor on all open proxies, on all resolutions put to the meeting. The notice of the meeting was made available to shareholders on the 24th of September 2021. Unless there are any objections, I'll take the notice, including explanatory notes, as read. I'll now move to the first item of businesses, to receive and consider the financial report, the director's report and the auditor's report for the company and its controlled entities for the financial year ended 30 June 2021. A copy of the FY '21 annual report was made available to shareholders on the 26th of August of this year. A copy of the annual report is also available on the EXP investor website. There is no formal resolution to put to the meeting in relation to the adoption of the FY '21 annual report. However, I'll respond to questions from shareholders in relation to the annual report. Cameron Hume of RSM is also available online to respond to any questions relating to the audit and the financial statements. Sandra, are there any questions?

There are no questions, Bob.

Very good. There being no questions, I'll move to the first item of business. Resolutions 1 and 2 relate to the reelection of directors. The notice of the meeting included the attributes of each of the directors standing for reelection today. I will take those as read. Resolution 1. This resolution relates to the reelection of Anthony Boucaut as a Director of the company, who retires in accordance with clause 11.5 of the company's constitution, and being eligible, has offered himself for reelection. I'll now respond to any questions. Are there any questions, Sandra?

No questions, Bob.

No questions. There being no questions, I'll put resolution 1 for the reelection of Anthony Boucaut as a Director of the company, with valid proxies now displayed on screen. Unless you've already done so, please cast your vote for resolution 1. Resolution 2. This resolution relates to the reelection of Neil Cathie as a Director of the company, who retires in accordance with clause 11.5 of the company's constitution, and being eligible, has offered himself for reelection. I'll now respond to any questions. Are there any questions, Sandra?

No questions, Bob.

I will -- thanks, Sandra. There being no questions, I'll put resolution 2, the reelection of Neil Cathie as a Director of the company. Valid proxies are now displayed on the screen. So if you are able to vote now, please do so. Resolution 3 is in accordance with the Corps Act resolution for the adoption of the remuneration report included in the FY '21 annual report is required to be put to shareholders of the company. The vote on this resolution is advisory only and nonbinding on the company. However, the directors recognize the outcome of the resolution as an indication of shareholder sentiment in relation to the FY '21 remuneration report. I'll now respond to any questions if there are any. Sandra?

No questions.

Okay. Thank you, Sandra. Being no questions, I'll put resolution 3 for the adoption of the remuneration report for the financial year ended 30 June 2021. Valid proxies are now displayed on the screen. And if you haven't done so, please cast your vote on resolution 3. Thank you. So resolutions 4, 5 and 6 relate to the issue of shares and the grant of service rights and performance rights, respectively, to Mr. John O'Sullivan, the CEO of the company. The Board approved the award of a short-term incentive in relation to FY '21 to key senior executives, leading to CEO, John O'Sullivan. The Board further approved that subject to shareholder approval today, 50% of the STI award would be satisfied by the issue of ordinary shares in EXP, and 50% of the award would be satisfied by the grant of service rights in EXP. Resolution 4, therefore, seeks approval for the issue of 401,671 ordinary shares in EXP to John O'Sullivan in satisfaction of 50% of his FY '21 STI award. I'll now respond to any questions. Sandra, are there any questions?

No questions.

Sandra, there being no questions, I'll put resolution 4 for the issue of 401,671 ordinary shares to John O'Sullivan on the terms summarized in the Notice of the Meeting. The valid proxies are now shown on screen. If you're able to do so, please vote on the resolution now. Resolution 5, 6, approval for the grant of 401,000 service rights to John O'Sullivan in satisfaction of 50% of his STI award. I'll now respond to any questions on that. Sandra, are there any other questions in relation to this matter?

No questions.

Okay. The valid proxies are now on screen, and you can cast your vote on resolution 5. Resolution 6 relates to the grant of performance rights to the CEO of the company. The Board approved the grant of performance rights under the long-term incentive plan to key senior executives, including 941,058 performance rights to John O'Sullivan in accordance with Listing Rule 10.14 and subject to shareholder approval today. I'll now respond to any questions. Sandra, are there any questions in relation to this?

No questions.

Okay. There being none, I will put resolution 6 for the issue of 941,058 performance rights to John O'Sullivan on the terms summarized in the Notice of the Meeting. The proxies should now be on screen. If you're able to do so now, we'll take votes on that resolution. That actually concludes the formal resolutions to the meeting. If you have not already done so, please cast your votes now as the poll will close shortly. The results of the poll will be released on the ASX company announcements platform as soon as they are available this afternoon. I think we've provided enough time now. I do thank everyone for their attendance at this AGM. I declare the poll and the Annual General Meeting now closed. And I thank my fellow directors and John O'Sullivan and his executive team for their participation, but more importantly, their work through this year. Thank you very much. I'll conclude the meeting.