Infotrust Ltd (ITS) Earnings Call Transcript & Summary

Good afternoon, everyone. My name is Shan Kanji, and I'm the Chairman of Spirit Technology Solutions Limited, and it's my pleasure to welcome you to our 2025 Annual General Meeting. I begin by acknowledging the traditional owners of the land on which we're presenting today and the lands on which we live, work and gather, and pay my respects to elders past, present and emerging. Time is now 4:00 p.m., and there being a quorum present, I formally declare the meeting open. Shareholders will be able to view and participate in the live webcast of the meeting, ask questions, and cast direct votes at the appropriate times whilst the meeting is in progress. I'm joined today by my fellow directors, the independent auditor and some of Spirit's management team. Spirit's Board in attendance: Mr. Julian Challingsworth, our Managing Director and CEO; our Executive Director, Mr. Simon McKay; and our nonexecutive directors, Ms. Lynn Warneke, Mr. Dane Meah, and Mr. Russell Baskerville. Lynn joined the Spirit Board in October 2023 as an Independent Director, and she has chaired the Audit and Risk Committee since July 2024. Lynn is an experienced, qualified Chair and Non-executive Director with expertise in strategy, digital services and product development, customer experience and cybersecurity. She has extensive cross-industry experience in critical infrastructure, professional services, government and tertiary education, as well as the technology and start-up sectors in senior consulting and executive leadership roles. The Board and I wholeheartedly recommend you support her reelection. Ms. Kaitlynn Brady, representing PKF, the company's auditors, is also in attendance, and will make herself available during the meeting to answer questions on the accounts at the appropriate time. I would also like to welcome Mr. Paul Miller, our CFO, and Mr. Nicholas Hornstein, our Company Secretary. Nick was appointed Company Secretary of Spirit Technology Solutions in March 2025, and has served as General Counsel since November 2024. He is an experienced corporate lawyer and governance professional with over a decade of expertise across ASX listed companies, fintech and financial services, and top tier law firms in Australia and New Zealand. Nick brings deep capability, corporate governance, mergers and acquisitions, regulatory compliance and corporate advisory. The Notice of Meeting has been given in accordance with the company's constitution and companies are available for you on the company's website or on the ASX announcements platform. The purpose of this meeting is set on the notice of Annual General Meeting dispatched to shareholders. Unless there are any objections, I will take the notice as having been read. The format of today's meeting will be as follows: brief opening remarks from myself and the CEO, formal consideration of the business on today's agenda with an opportunity to ask questions on any of the formal business at the end of the last resolution, and lastly, completion of the poll voting on the formal items of business. To ensure we capture the true intention of shareholders, I've determined in accordance with the company's constitution that a poll will be held on all resolutions at today's meeting. Fellow shareholders, financial year '25 was an excellent year for Spirit, positioning us as a leading provider of cybersecurity and Secure Managed Technology, and the largest ASX-listed cybersecurity provider. The company delivered $102.5 million in revenue and $11 million in underlying EBITDA, up more than sixfold from the prior comparable period. Cybersecurity is now our fastest-growing business, contributing almost half of group earnings, supported by the acquisitions of Infotrust in April 2024, and Forensic IT in October 2024. In addition to our ongoing underlying EBITDA performance, we're pleased to reiterate guidance for FY '26 of revenue in excess of $114 million, and underlying EBITDA in the range of $12.6 million to $13.6 million, representing organic underlying EBITDA growth of between 14% and 23%. Our people remain at the center of our success. Across the year, we supported colleagues through transformation programs, launched well-being initiatives, advanced diversity and inclusion agenda and invested in leadership capability. These efforts reflect strong people-centric culture we're building at Spirit. Before us today is a special resolution to change the name of the company from Spirit Technology Solutions Limited to Infotrust Limited. This reflects our Cyber-first strategy, better positions us in the evolving market landscape and simplifies our market identity. We are uniquely placed with a national footprint, a sovereign security operation center and deep digital forensic incident response capability. The name Infotrust better represents our promise to customers that we can be trusted to safeguard their information and to help them remain resilient in a fast changing threat environment. We are well placed to securing your future. We've also reserved the ASX ticker code ITS to reflect our new name, which will adopt shortly after this meeting. This will ensure our ASX market presence reflects our new identity from day 1. Thank you for your continued support. I will now invite our CEO, Julian Challingsworth, to present the operational and financial performance of FY '25, and our outlook to FY '26. Over to you, Julian.

Thank you, Shan. I'd like to run through today 3 key points really around the performance of FY '25, how FY '26 will unfold, and then some of the underlying thinking that has gone into the brand change and what it represents the business and our customers and for our shareholders. So FY '25 was a significant year of transformation for the business with reasonably good results as a consequence of the changes that had been made post FY '23. You see the year achieved revenue of just over $102 million, significantly up from $91 million in the prior comparative period. Underlying EBITDA of $11 million, up sixfold from $1.7 million, primarily as a consequence of managed technology restructure, reducing the significant loss in the previous period. The earnings of Infotrust coming into the period and continued growth from our cloud and communication practice. You can see cybersecurity revenue up 58% to -- sorry up 58% to $30 million, significantly there simultaneously increasing our underlying EBITDA margin to quite a healthy 23%. Cloud and Communications, as noted, back to its growth position, up 18% on the prior period to $7.7 million. During the time, we completed the acquisition of Forensic IT, which introduced a new capability to the organization, significantly deepening our incident response capability and enabling us to undertake digital forensics for our customer. Two services that we will continue to invest in and grow in FY '26. Next slide. From an individual perspective of the business segments. You can see there very solid growth in our cybersecurity practice, really being driven by customers looking for integrated services across the cyber stack. The capabilities that we introduced with Infotrust coming in, really strengthened our ability to deliver in more geographies. Historically, we have been strong in Brisbane. And Infotrust deepened our capabilities in Sydney and Melbourne, and more importantly, introduced a stronger leadership team, introduced new capabilities and enabled us to serve now the 1,000 customers that we have in the base. Integration of Forensic IT have been delayed. And I think if I call out challenges in '25, I would see that as the most significant one that we are addressing in '26 in regard to that acquisition. We've noted some integration delays that will be resolved in '26. We expect to see them return to growth but also what they have been very successfully in doing is integrating new opportunities into the organization, and we've had some ongoing wins in that area. Secure Managed Tech, as a result of coming through the restructure and the appointment of a new Executive Group Manager, Dan Suto, has started to find its feet. And you'll see in FY '25, we began that journey by washing its face with a small underlying EBITDA of $300,000. It has become a key part of the go-to-market strategy, and I'm going to touch on that later in how we can continue to build deeper services with our customers, and drive more recurring revenue as a consequence of having a combined cybersecurity and secure managed tech. Cloud and Communications, solid growth within their numbers, and an exciting opportunity where they've opened new points of presence in South Australia and Western Australia, albeit from a full small base, we are seeing good growth in those markets and opportunities to expand the cloud and communications offer to their SME customer base. Next slide. As we head into FY '26, we are positioning for strong organic growth with revenue expected to exceed $114 million, underlying guidance between $12.6 million and $13.6 million, which represents EBITDA growth of up to 23% with a scalable model and having made significant investments in platforms, personnel and capabilities that will enable us to not only grow organically, but look to disciplined inorganic growth. Exciting for me, cybersecurity set to be the largest earnings contributor in '26, and we'll continue to look for opportunities to expand margin within that team. Positive earnings contribution from all segments, a long history of managed tech having a difficult period. We continue to have opportunities to improve that business. More importantly, it is transitioning itself from an MSP to an MSSP and aligning itself with the messaging that customers expect security in all elements of their technology investments. The sovereign first strategy has really accelerated for us. People who followed us will note that there's been 3 significant transactions in the last 6 months. CyberCX sold to Accenture, missing link to Infosys. And recently, 1 of our competitors, Sekuro, sold to a U.S. NASDAQ-listed firm. This has given us a really strong opportunity in FY '26 to be the leading sovereign cybersecurity player, something our government and critical infrastructure clients find important and really presents and underpins the decisions that the Board has made to rebrand the organization, extend the cyber-first strategy, and be consistent in the market offer under the Infotrust brand. We're also seeing significant customer investment in AI. What that means for us is an increased amount of the pipeline in regards to how do they secure that work, how do they understand and invest in governance of their AI solutions. So as we're seeing that significant investment in many organizations piloting and going live with many AI projects, Infotrust is there to help them secure the information and data to enable those projects to be a success. Our investment in Tier 1 platforms has not been without pain. We've moved to ServiceNow and Microsoft Dynamics. But as they go live and come in, we're seeing significant opportunities to be more efficient, to be more accurate, and to improve our margins as a consequence of those decisions. The small wins that we've had to date, post going live, we look in '26 to make large wins to be more efficient, more profitable and to be able to scale our operations, especially power SOC, our Security Operations Center, to take on more customers on our multiyear recurring contracts. Spirit Group continues to pursue both an organic and inorganic growth strategy, and there are a number of opportunities that we will pursue to fill in some gaps. And so we see geographic expansion as important, and we'll look to grow into areas, importantly, following a disciplined inorganic growth strategy. Next slide. A key point here is how we've built the organization and how we're expanding our cyber capabilities. So historically, our cybersecurity business and the way that we've reported that in segments has been very much around Infotrust and Forensic IT. The transition to a single brand is really to follow the way that customers see their security requirements. The areas of secure network, infrastructure, Microsoft solution, cloud backup and recovery by our customers are seen as contributing to their security posture. They're not separate things. Now we have the opportunity to bring them together under the Infotrust brand and be able to take to market a much stronger message around how we deliver security from our network [ upwards ]. This is a market position that is quite unique in the mid-market. So traditionally, organizations have had multi-partners and have put together a technology strategy that brought the pieces together, and had all the issues that can come with having multiple vendors. For us to be able to take to our 1,000-plus customers, a united brand with teams that have deep expertise across both those areas who work together, who are focused on securing our customers provides us with a great opportunity. This, combined with what I mentioned earlier, with some of our key competitors moving out or not being able to offer that sovereign capability. So this is really the defining moment that underpins the change of the brand to Infotrust. How do the customers see us, what are their expectations, how can we deliver more and better outcomes for our customers. So with the resolution today, we will look to change the brand, come out within Infotrust, and leverage the opportunity as a leading sovereign provider of security and managed technology. So as discussed, post the AGM, we will undertake a brand refresh. The listed code name will change. As Shan mentioned, we reserved ticker, ITS, that will be updated. And you can see our sector change from our legacy telecommunications services to software and services, really aligning where we're taking the business and supporting the changes that we have made. Next slide. The two key changes. Next week, you will see that our key web-facing assets change, an updated homepage, more information around the services that we provide to customers, and for our investors an updated portal containing all the normal information, plus our ability over the next year to communicate more with our investors around interviews and digital interactions, something that we're looking forward to -- as we have important announcements to make with our growth strategy and with our acquisition strategy. Thank you.

Thank you, Julian. I'll now turn to the procedures for today's meeting, how you can submit questions and how voting will be conducted on each resolution. Today's meeting is being held through automatic online platform powered by Automic, allowing shareholders and proxies to attend virtually, participate in the live webcast, ask questions and submit votes. There may be some time lag for online attendees, so please lodge questions as early as you can. All the other proxies have been recorded, and votes on each resolution will be displayed on the screen. If you already launched a proxy form and voted prior to the meeting, you do not need to vote again unless you wish to change your instruction. For those who have not yet voted, please cast your votes when the poll is opened. As advised in the Notice of Meeting, where I have been appointed as proxy, I intend to vote in favor of all resolutions. Questions can be submitted at any time via the Q&A icon, this will open a new screen. At the bottom of that screen, there is a section for you to type your question. Please start your question by typing your shareholding SRN or HIN, this will allow the moderator to identify as a shareholder. If you wish to speak, type your SRN or HIN, and then type I'd like to speak. Once you finish typing, please enter on your keyboard to send. Please note that whilst you can submit questions from now on, those questions will be addressed after the final item of formal business of the meeting. Please note that all questions are moderated and then may be consolidated. If time runs short, answered later by e-mail or posted on our website. In order to vote at this meeting, you need to have registered your shareholding with Automic. If you have not already done so, you can follow the instructions on screen to register and log in to enable you to vote at this meeting. Voting today will be conducted by way of a poll on all items of business. In order to provide you with enough time to vote, I will shortly open voting for all resolutions. When the poll is declared open, the green vote button will appear. Please click on refresh, if you cannot see it. To vote, simply select the direction in which you would like to cast your vote. The selected option will be marked. Once voting is declared closed, you must select next and then confirm to submit your vote. You will not be able to change your vote after pressing the confirm button. Before we begin the formal business this day, I will address any questions that shareholders may have on the meeting procedures just outlined. Does anyone have any questions or comments on the meeting procedures?

Chair, there are no procedural questions.

As there are no procedural questions, we will now move on to the formal business of today's meeting. As outlined previously, all resolutions have been considered by way of a poll. And at the end of the last -- being conducted at the end of the last time of business. Before opening the poll, I wish to remind shareholders that the poll will remain open for additional time after we've considered all resolutions. We will now open the poll for shareholders, proxy holders and authorized corporate representatives, and you may cast your votes as and when the resolutions are being addressed. I now declare the poll open. I refer to the first time of business set out in the Notice of Meeting. First item of business pertains to the receipt and consideration of the financial report of the company, together with the Director's report and the auditor's report for the year ended June 30, 2025. These items are contained in the annual report, so I will ask that they be taken as read. The annual report is available on the ASX announcement platform and on the company's website. Corporations Act requires the accounts and reports to be laid before shareholders at the Annual General Meeting. However, except as set out in Resolution 1, there is no requirement for a vote of members to be taken on them. No written questions to the auditor under Section 250PA of the Corporations Act received before the cutoff date, being 5 business days before this meeting. Questions may be directed through myself to the auditor in relation to the conduct of the audit, the audit report, the company's accounting policies or the independence of the auditor. As this matter does not require a vote, we will now move to the first resolution. I now refer to Resolution 1, which pertains to the adoption of the remuneration report which forms part of the director's report for the financial year ended June 30, 2025. I now propose that shareholders consider and if thought fit, pass Resolution 1 as set out in the Notice of Meeting and as displayed on your screen. The remuneration report is set out in the directors' report in the company's 2025 annual report. The remuneration report sets out the company's remuneration arrangements for the directors and the key management personal of the company. The vote on this resolution is advisory only and does not bind the directors or the company. In respect of this item of business, the following proxies have been received as outlined in the presentation. I move that shareholders consider, and if thought fit, pass the ordinary resolution. I now refer to Resolution 2, which pertains to the reelection of Lynn Warneke as a Director of the company. I now propose that shareholders consider, and if thought fit, pass Resolution 2 as set out in the Notice of Meeting and as displayed on the screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. I move that shareholders consider, and if thought fit, pass the ordinary resolution. I now turn to Resolution 3, which refers to ratification of the prior issue of 1,886,793 shares. I now propose that shareholders consider, and if thought fit, pass Resolution 3 as set out in the Notice of Meeting and as displayed on the screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. I move that shareholders consider, and if thought fit, pass the ordinary resolution. I now refer to Resolution 4, which pertains to the approval to grant FY '26 performance rights to Julian Challingsworth or his nominee. I now propose to shareholders to consider, and if thought fit, pass Resolution 4 as set out in the Notice of the Meeting and as displayed on the screen. In respect to this item of business, following proxies have been received as outlined in the presentation. I move that shareholders to consider, and if thought fit, pass the ordinary resolution. I now refer to Resolution 5, which pertains to the approval to grant FY '26 performance rights to Simon McKay or his nominee. I now propose that shareholders consider, and if thought fit, pass Resolution 5 as set out in the Notice of Meeting and as displayed on the screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. I move that shareholder to consider, and if thought fit, pass the ordinary resolution. I now refer to Resolution 6, which pertains to the change of company name. I now propose shareholders consider, and if thought fit, pass Resolution 6 as a Special Resolution as set out in the Notice of Meeting and those displayed on the screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. As this resolution is a special resolution, requires 75% of votes cast in favor for it to be deemed as passed. I move that shareholders consider, and if thought fit, pass special resolution. I now refer to the final item of business, Resolution 7, which pertains to the approval of the 10% placement facility. I now propose that shareholders consider, and if thought fit, pass Resolution 7 as a Special Resolution as set out in the Notice of Meeting and as displayed on the screen. In respect to this item of business, the following proxies have been received as outlined in the presentation. As this resolution is a special resolution, requires 75% of votes cast in favor to be deemed as passed. I move that shareholders consider, and if thought fit, pass the Special Resolution. Ladies and gentlemen, that concludes the formal business of today's meeting. We will now go to shareholders' questions. Does any shareholder have any questions on any of the items of business?

Chair, we have received four questions from one visitor, Stephen Mayne.

I'm happy to take those question.

Question 1. Thank you for disclosing the proxies earlier to the ASX along with the formal address and well done for receiving such strong support on all resolutions. Did you have any engagement with major shareholders before the AGM about remuneration issues, board composition or anything else?

We maintain an open dialogue with many of our major shareholders throughout the year, and several of them have representatives on the Board. Ahead of this AGM, we engaged directly with several large investors and their feedback has continued to inform our approach to remuneration and governance. We received strong support across all resolutions today reflects an ongoing engagement.

Question 2. What is our history in terms of doing placements, SPPs and pro rata capital raisings. And if we do a placement in the next 12 months, can you undertake to do a follow-on SPP for retail shareholders on the same terms?

Historically, we've used a mix of placements and pro rata structures, including entitlement offers that allow retail participation. Placements provide speed and certainty in volatile markets, but we are committed to fairness. Where we do a placement, we will always consider a follow-on share placement plan so that retail holders can participate on the same terms.

Question 3 relates to Thorney. Last month, they increased their stake in our company to 9%. What is our history with Thorney? Do we regard them best supportive, hostile or neutral, and have they requested a Board seat? If they listed their stake above 10% and ask for a board set, what would we say?

We welcome all long-term shareholders, and regards Thorney, as a supportive institutional investor. They have not requested a Board seat. At present, we have no intention to change the current Board mix, which we believe has the right balance of skills and independence of the company. If any substantial shareholder will request Board representation in the future, that will be considered by the full board against governance best practice and the interests of all shareholders.

The last question. The first part is a general appreciation for moving the AGM forward from November last year to October this year. The question is, could you please disclose the headcount data in the full results, revealing how many shareholders voted for and against each resolution so we can see the retail shareholder sentiment and the tragically low participation rate.

We deliberately moved this AGM earlier as part of good governance. On headcount, while the Corporation Act requires the closure by shares not holders, I can confirm participation was approximately 20 shareholders for each of the key resolutions. Overwhelming majority of shares supported all items.

Chair, there are no other questions.

If there are no further questions, this concludes the Q&A session for the formal part of this meeting. As mentioned earlier, all voting today will be conducted by way of poll on all resolutions, noting the poll was opened earlier in the meeting. We will now provide shareholders with additional time for poll voting to be completed. [Voting]

If you require further time to complete the poll, please indicate by raising your virtual hand. As there has been no request for additional time, I now declare the poll closed. Once the poll results have been processed, we will announce the results later today on the ASX market announcements platform. Ladies and gentlemen, that concludes today's Annual General Meeting. Since the company has not received notice of any other business, I declare the meeting closed. Thank you for your attendance, and we look forward to your continued support.