Kinatico Ltd (KYP) Earnings Call Transcript & Summary

Okay. I think we can get started now. Thank you so much, everybody, for joining us and for your interest in CV Check. The code is CV1, so ASX:CV1. Today, we have CEO, Michael Ivanchenko. He's going to walk you through the FY'22 results. If you could all please stay on mute, that would be most appreciated. And then we can submit questions and answer them as they come through by the chat box. So I will now hand it over to Michael to lead us through the company's results and presentation. Over to you, Michael.

Thanks, Julia. I'd like to start today by acknowledging the Traditional Custodians of this land upon which we gather now and pay my respects to their leaders past, present and emerging as I come to you today from Gadigal land. Thank you for joining me this morning to go through a little bit of an overview of the previous year and also a bit of a flavor of what we have planned for the year to come. Of course, start with the mandatory disclaimer, I will not be providing any guidance in this presentation and nothing that is presented should be taken as formal guidance. And all further research and investigation is on your own behalf. So within this year that we've achieved over the past 12 months, and it's actually one day past my 1-year anniversary of joining with the company, very pleased with what we've achieved over that year in terms of the transformation of the organization and where we're going and what we want to achieve. And very much the fact that we've done it while we brought 2 some companies together, and I'll touch on a little bit that at the same time. Across our businesses, we maintain a customer list in excess of 10,000 customers and that is business customers, that does not include individuals. Over the year, our revenue is up 51% year-on-year to $26.4 million. 80% of our customers are repeat customers. And during that year, up from $0.6 million the year before, we've generated $2.4 million of pure SaaS revenue. And I'll give a little bit of color to some of the other revenue categories that we've got in the group and certainly put a bit of color on the type of recurring nature or longevity, though actually I don't think we do a very good job of explaining. Our gross margin lifted to 64%, up from 59% the year before. That has come about through efforts and negotiations with some of our suppliers, but also the effect of starting to see the SaaS licensing come through to our numbers. We will continue to drive that number higher as we increase our pure SaaS revenue. But we are also looking at other ways to actually take cost out of the business below the line that won't necessarily be reflected in gross margin, but maybe there's an increase in accretive revenue. We generated $3.1 million in cash from operating activities through the year, again, a material uplift from the year before. And then finished the year with circa $12 million of cash in bank, and we have no debt. We are very strongly positioned for all the things that we want to pursue for our agenda for the year to come. I listed in presentation in June current growth phases and the next phase. And they haven't changed, but I will put a little bit more color on them, sort of some of the detail. But it's important to note, in terms of the overall strategy to describe that, it is 2 sides of the coin. We will continue to grow and continue to invest in growth, but at the same time ensuring that, that growth comes with accretive revenue. So specifically on some of the highlights. A year ago, started in terms of being full steam into the integration of CV Check and Bright People Technology, of the 2 companies coming together. And a lot of work has gone into ensuring that we have the clarity of product proposition in the group and for our customers to ensure that we can realize the obvious synergies of bringing the 2 companies together. And so we've now finished the year where we have all of the company fully integrated, not only the systems and the platforms, et cetera, but clarity and direction and market seat around everything that we are looking to achieve and grow. And again, a little bit more of that to come, but you would have already seen me presenting and the company presenting to our customers the product differentiation of CV Check as Australia's and New Zealand's premier background screening credential validation service and a transactional business. So I think being an end-to-end compliance management and monitoring solution for the full worker life cycle, right from the point that they're looking to staffing an organization, but daily of all of the requirements of the ever-increasing complexity of compliance that companies face. We've done that and brought the two companies together while we've achieved 51% revenue growth. It's certainly not uncommon that there would be a period of loss of momentum in the organization while bringing the companies together and having that clarity, but I'm very pleased to say that with the support of the executive team and all of the staff in looking for where we're going, we've to managed to achieve that. In terms of our growth, we very much revamped our go-to-market and market-facing positioning. There's a revamp of the CV Check website and market presence, and recently starting in early July, we revamped the Cited one and we've seen very positive effects from that, which I'll be going through a little bit more further on. But over the course of the last year, we have actually added 2,500 new corporate customers across all of our products, which is the thing that is driving that 51% revenue growth. The other big number that I'd like to call out is that across all of the many integrations we have with the likes of PageUp, LiveHire, [ Workday ], SnapHire, et cetera. The base third-party integrations generated $3.4 million worth of revenue for us in the last year. That is revenue that in many cases is currently categorized as transactional yet coming from these third-party integrations with organizations who are contracted within other organizations is revenue that we expect to continue and expect to grow. So certainly 97% year-on-year shows that we're at the start of that journey, but we do expect that effect to continue as we have been actively focusing on our partners and our integrations and seeing how we make sure that we service them successfully. In terms of the innovation, a lot has gone on. We delivered monitored compliance to market, both around Christmas time in January for version 1, which was the beginning of the monitoring component of monitored compliance and then V2 launched around June, which gave us the further iteration of visibility of automation within the management of that monitoring services within companies. That will continue to iterate. We will release 3, 4, 5 et cetera, getting into a standard cadence of releasing new features and the reason why companies are attracted and benefit from the ongoing license arrangements that they have with us. We go to market our OnCite product, and certainly our OnCite credential passport is something I'm very excited about. We have launched our passport to market and it is at the start of its journey. It has been very well received by our customers that are now utilizing it on the Cited platform, but it is very much the beginning of where we're going to take it and the things that we're going to add to it, and I'll go through that a little bit further on. We've progressed with our TDIF accreditation, the Australian government identification framework. We are at the hands of the government for the timing on that as to when they will formally give us their response to all of our submissions. It is a process that, unfortunately, we don't have a great deal of visibility in terms of the progress other than the intermittent interactions. But it is progressing and I'm comfortable that the interactions we're having with government are positive and are definitely headed in the right direction. And then, finally, as I mentioned in the first point, bringing 2 companies together is always a challenge, and particularly in technology companies with so many competing or historical replicative components and platforms. We've spent the year dealing with that to give us our ability to actually provide market clarity on our products. And more importantly, for me, give us the baseline and the work that's been done to the things that we are going to announce and going to release to market in this coming year. The company is fundamentally set up to solve customers' increasingly difficult compliance obligations. And that is significant for me because all companies are different. So what we have is the position that where the best seat is a CVCheck product, fine; where the best fit is a Cited product, excellent. We will make sure that we solve customers' problems or can solve customers' problems on their individual basis, not trying to present a one-solution-fits-all and then try and convince them why they should go with our solution as opposed to us understanding and solving the problems that they have. I want to spend a little bit of time another piece of work we've done during the year that I think is significant obviously internally, but also as it pertains externally. So bringing 2 companies together, they do have these 2 cultures. They have different histories and fundamental, historical beliefs on their directions or the way to go about it. So we spent a lot of time from the ground up forming our company values for the combined entity. And not only does that give all our staff and all of our connections the clarity and the understanding around the organization, it also provides external organizations, our customers, knowledge of who they're dealing with. Is this a company that I relate to? Is this a company that shares my values in the way they go about their business. But starting, for me, from staff, we will not be successful unless we have an energized, engaged workforce that is passionate about what they do and why they come to work. What's the barbecue conversation answer? So starting with our purpose, what is my why? Why do I come to work every day? What am I proud of is powering insights for better safer workplaces. Just powering insights for workplace isn't enough, it is about driving safely. It is about driving clarity. So that when -- knowing what we help organizations when they hire somebody into the medical profession, there is a confidence that, that person is qualified to do the procedures that they're presenting. When you're going to work and your daughter goes and works in an organization for the first time having left school, that the people they're going to be sitting next to do not have any kind of histories or restraints, et cetera, on them because of the checks that have been done. That certainty in that safety is important. What we do is around our technology helping organizations to know their people significantly, simply. While our clients focus on opportunities, we connect them to insights that lifts their capability and mitigate their risk. We've had plenty of feedback from our customers in the discussion of, putting it quite bluntly, don't tell me that my compliance challenges are difficult, I know that. Don't tell me that there's a big overhead, we know that. What we want to see with the solution, what resonates and what is our differentiator across our product set is the simply. Making compliance management easier, so that it leads on to our vision of world where data is trusted and organizations are free to focus on their opportunities. As a manager, as a person responsible in the business, having the confidence that the compliance obligations that the things that you need to know you can trust are in place, so that you can focus on your purpose we see as a key issue and something that we are very passionate about driving and into our people values. Obviously, with our privacy of data and trust of privacy of data collectively, our customers, us as a company, et cetera, and [ how we earn it ], but hence it is our highest priority. We're very passionate about diversity and inclusion. And our team strength comes from everybody's individuality. The world is made up of individuals, understanding that, driving with that. And therefore, having everybody in a safe environment to have a voice about what we do and how we do it means we are a better company. Gaps are opportunities to make a difference is all about when you see something we can do better. When you can see something that we could be doing that we're not doing, that's the opportunity to speak up, do it, take it, own it. That's how we evolve and become better. Never stand still. Which leads into the final one, deliver the goods and strive for the great. We will always look to iterate, always look to improve our products for our customers and everything that we do. But you don't wait till they're perfect before you get them out because they're never perfect, they're never finished. And we will continue to make sure that we are doing the best things possible every day. And all of that adds up to a core tenet for our organization. Our core tenet for what it is that we ultimately provide is helping organizations to know their people. One of the things I also want to touch on in terms of wins for the year. We announced Hireup in terms of the size of win, and significant certainly for us not only because of its size and because of the sector in plays in the NDIS space. But we have had numerous wins we've cited over the year. All of those moments and the ones that I'm listing there will generate accretive license revenue in FY '23. We haven't announced them because I don't see them as material in their own right, collectively they are significant, but it is also about where we're at in growing the size of business. So I'm not looking for one or two wins to make it successful. We will continue to build it and continue to get the velocity around all of our customer wins. And when you see all of those labels that are there in the sector that we're playing in, I am very happy with the progress that we've achieved to date and certainly expect more in the year to come. The other one that I will call out specifically is Flybuys has traditionally been a CV Check customer and has migrated over the Cited because of moving to the monitored compliance space from just the preemployment space. And then we have the likes of Atlas mining renewing their long-term agreement into Cited agreement, being traditionally just looking at some of the transaction portions. So in terms of what I refer to internally as the green shoots growing, there's certainly plenty that I'm proud of and happy with in terms of our progress in that space. But a little bit more on FY '23. I've been framing a lot of my discussions over my first 12 months, the CGI@CVCheck. And even on our highlights page, they consolidate, grow and Innovate. We are now moving beyond that and FY '23 is evolving CGI to CGIS@CVCheck. Our mantra, which is continue to grow and innovate at scale. And then we've shown that we can grow this business, we can win customers, we can retain customers, et cetera. The move now is to make sure that as we continue to grow that revenue base, we are doing it without having an increasing cost base to actually service that. And a lot of the work that we've been doing over the last 12 months has allowed us to do that each time bringing that to market. So a few things that we've done. First of all is we've materially expanded our sales team with specialist in sectors around SaaS and delivering on that broad scale SaaS growth, making sure that we are playing in the right way, at the right levels for enterprises, et cetera, to win that business. We will be launching biometric identity validation this year. This is about improving the user experience and the customer experience for our customers. It's about the speed of which things can happen on the platform to mean when I need to validate my ID, we can do it in an automated way, digitally, accurately and in a way that is building the trust around the information. Along with that is new user experience. We'll be launching new user experiences across all of our products. Evolving on site, but the user experience and the simplicity, the speed with which our customers can interact with all of our platforms is going to improve. And to that end, we'll shortly be launching the direct credential entry into OnCite. And that ties to the next point that we will be doing that in an automated way, combined with the biometric identity validation, meaning the -- we are delivering on the promise, on the stated benefits of OnCite in our platform that we are moving the compliance obligation, from a department within organization to a self-serve or a self-managed function where the workers themselves are entering that data. They're not having somebody who is constantly ringing them, reminding them of what they need to do, the platform takes care of that. And then what you have as an organization is the clarity, the transparency and the trust across that data. And then, finally, to provide clear air to our products. We'll be announcing -- or seeking approval at our AGM coming up shortly to rename the company. We have the company selected. We have the URLs prepared, et cetera. But this, for me, is about giving us the right space to grow where we need to grow as a global aggregator of RegTech technologies without confusing the marketers to say right now the difference between CVCheck, the product, will continue to grow and evolve; and what is currently CV Check, the company, and the fact that it also does monitored compliance, et cetera, et cetera. So I look forward to sharing that main news with you at the AGM, and I see that brings a very exciting next step in the evolution of the company to provide clear air. But collectively, our plan for this coming year is that continued growth, but it is about realizing the potential in the organization about how that is accretive revenue and bringing to life all of the advanced technology things that we've been working on in terms of the biometric identity validation and then most significantly automation and artificial intelligence across our operations that not only is going to reduce cost, but materially improve the user experience that our customers expect and deserve. So just a reminder, and I know a lot of you have seen this slide and the next one, but it is the crux of the pieces that hold together what we do. The idea that not only do we have external qualifications and licenses, but then company-specific requirements around training all of your various inductions and regular updates, whatever they may be around business rules or specific company requirements, all managed within the platform. Meaning that you can trust that data to allow workers and staff to focus on what it is that they will work to do, and not have this overhead and the increase in complexity coming back again and again. And then with OnCite, meaning that we're doing so in a way that not only they entrench part of just standard daily operations, but removes the overhead, and in a lot of cases, in organizations the stress of actually collecting this data and automating that in itself in terms of the daily process. And then all of the pieces then showing when I say with clarity across our product set now for our aggregation is our technologies. This is within the new company structure what we're about. It is the aggregation of RegTech technologies for the purpose. CVCheck, as a product continues to grow, has clear air in terms of its purpose and its direction; Cited in terms of its real-time engine and monitoring services; and all held together with OnCite; and then the other components that we will be bringing further to market, particularly around data and analytics in future forecasting. So a little bit on OnCite. As I mentioned, we've launched. Currently sitting at 4.8 stars in the app store, which I'm very happy with. We are, at the beginning of June, downloads being sub 10,000 at this stage but it's a number that I'm happy with, with where we're at, at this stage. And certainly, every deal, every discussion we are having with all of our customers at the moment, OnCite is at the center of it. The big features coming up, the direct entry of the credentials directly via the app. So the idea of having to have your credentials with you at the point in time and then the stress or whatever that may be around that is removed. We get to use the technology within the site, within the new user experiences to make that much simpler, much faster along with the digital identity with the biometrics. The big feature that is coming up soon is automated messaging and reminders directly to workers. So if you have a credential in the platform that is necessary for a role or a task that is coming up for renewal, the system will automatically trigger that within OnCite for the updated version to be uploaded, downloaded or sourced at the permission of the worker. The permission and the fact that the worker owns all of those credentials is extremely important to us as a tenet. And hence, it is a reminder to the worker to say that can we update this automatically as we can with the direct to source or is this something that you need to upload. But we validate either way. We are automating that and putting to the worker, under the control of the worker for their privacy. The app continues to be free to all users and anybody can download it and then ultimately start adding their data into it. But it remains and will continue to grow as the centerpiece of the user experience for all of our products. So just to sum up where we're going. So a year after, 51% revenue growth; EBIT moving to $1.1 million from $0.2 million; operating cash flow up to $3.1 million, up from $1 million; SaaS at $2.4 million; gross margin up to 64%; cash at bank at $12.2 million. So in fact, a solid year and what I would also describe as a challenging economic market, combined with the fact that we brought the companies -- 2 companies together. The momentum around our SaaS product and Cited is building as demonstrated with the customer wins that we're listing there. Then combined with the fact that 80% of our customers are already recurring and then I've already mentioned the 2,500 new corporates coming on, and we'll continue to grow and innovate with the new user experience that is coming across all of our products and the features coming into OnCite. We are actively pursuing growth at the moment. And as I mentioned, we've materially invested in the sales team and the sales tools and their approach. And that's coming at an effect initially, potentially in this first quarter from a cash position, but certainly nothing that I'm concerned about as it plays out throughout the timing, but that effect is going to have throughout the year. I mentioned we've launched a new Cited website and now about 50% of our leads coming in to the company because of that new website are for monitored compliance. It is not a case they're coming in for a particular credential or validation and then we go, actually you're probably get us suited for monitored compliance, they're coming straight into that funnel. The addition of biometrics and the automation and the features added into OnCite not only have the benefit of, as I outlined in terms of the cost efficiencies and the user experience, they've also demonstrable benefits in terms of the platform and why organizations should move to it. So certainly moving more and more of our SaaS revenue and transition of some of our CV Check's customers to Cited, et cetera, and that focus around the per worker, per month fee is certainly a focus. And then the other one to finish on, just that ongoing focus and the benefits that we see in terms of the formation of our data analytics and our insights portion of our business, which we are yet to launch.

I'm just checking I have a question. How do I see the unemployment rate moving into 2023. Will that be a concern to growth? It's something we look at every day. What we have seen is the unemployment rate is obviously low and I don't see that changing. We are still seeing the requirement within organizations for not only people changing roles and coming in, but how that they're actually managing the requirements of the monitoring of their workforce. So far, we haven't seen a negative effect of that. We haven't seen anything related to what everybody has called the big resignation. But I would actually say that even though the unemployment rate is very low, there is still a lot of transfer of people between roles. Chris, I'm just checking to see if I can unmute you.

I'll unmute myself. Could we get a bit as to the logos the new wins? Impressive wins there. Could you give -- maybe just talk a bit about how, say, Flybuys produced the products? Is it - I can understand use case for the miners and...

Certainly. Look, so can I just check that's come up correctly onscreen?

I can't see.

What have I done?

You stopped sharing.

Thank you, Chris. Let me see. How's that? We are seeing organizations from all industry types that around the fact that they still have obligations to manage day in/day out, company-specific requirements. So in the example, companies like Flybuys who have cybersecurity training and updates, whether it's phishing training and updates, they'd have to be done on a weekly basis or whatever it may be. To us, they're all credentials. And having that combination to know that not only has it been done, not only was it successfully passed, when does it need to be done again and then automating that process to actually get it out so that you know the certainty of that is happening is the type of things which bring in what I'd called the white collar industries. The other thing that we then see is that extends is even in the white collar space do I have multi-site requirements, even just different offices? Have I been inducted for these offices at these different locations? And while it's not the same in-depth safety type functions of a mine site, nevertheless, the obligations on the organizations, et cetera, is still there. Just that simplicity of that management is what we're seeing.

And I think you quoted $2.4 million SaaS.

Yes.

So that's the title, SaaS for '22?

Yes.

You are then exiting '22 on [indiscernible] wins?

$2.4 million for the year.

Yes. The $2.4 million for FY'22? And so what would FY '23 be regarding new wins?

$2.4 million, assuming we didn't lose any of the existing.

So basically, the June 30 billings per month was annualized at $2.4 million?

Yes.

Yes. Okay. Got you. And when do you -- so when does the credential check with, say, this CV Check as part of, say, for Flybuys or one of the miners, does that revenue get booked to the SaaS revenue? Or does it get it booked to the traditional revenue line?

It depends which products they've come in on. So if they're on the full service SaaS model, the transactions are included in that. If they're interacting with the CV Check platform, then that's the transactional number. But it's actually -- that's a really good point, Chris, because we do have a good amount of revenue that we currently report at as transactional revenue against CV Check, but it is tied with two relationships with companies that we have 5- and 10-year agreements with for the license service and some of our other products like in our logistics. So it is a higher quality of revenue than just being a transient transaction.

And then just, I guess, finally, you mentioned in the past you're clearly investing after growth. But then I guess just trying to understand from EBITDA, do you expect EBITDA to increase next year? Or are you...

Well, as I say, I'm not going to provide any guidance. But what I will say, I'll just reiterate my point about the CGIS. So we are driving to further demonstrate that we can grow at scale and drive accretive revenue.

You're expecting high revenue I'm actually understanding from there.

I'll say what else I'll say.

Michael, [indiscernible] has a question just in the chat box. How do you see unemployment rate moving?

That one I've covered. And I've noticed [ Michael Skaggs ] has his hand up.

A couple of things. I feel the company isn't valued as a SaaS company, but quite often [ when the sectors of the market that either fit or which they fit the bill ] as well. So I guess the question is how do we change the perception -- how are you changing the perception of the business to the wider market. And just a couple of little follow-ups to that. It's really a long list of a huge growth opportunity, and lots of people looks like are coming out from different directions. So can you share some of your thoughts on competition and where your competitors are? So there are a few sort of things that are on it.

So look, you're right about a lot of people recognizing the space and wanting to get into it. So the two things I'll say to that is our competition is broad and varied in terms of a lot of organizations, also saying, yes, we can do compliance. And the -- therefore, the competition in that space is does that organization have enough of a relationship already that means the customer is happy to consider them as the extension of that versus having something that is designed for purpose. And then the other side of that one is at the other end of the spectrum, I've said a few times and I will continue to say, in most cases, our biggest competitor is Excel. Organizations still manage a lot of this within either the risk, the finance or the HR department with Excel spreadsheets. And those spreadsheets get reviewed generally when there's an incident, and that information needs to be recalled rather than being actively managed. Or when somebody realizes that they need to do that once a quarter, it becomes a very big catch-up space to do it. We see our big competitive advantage in this space that what we have is a platform that is being built through the hard yards of learning over many, many years that solves the real-world requirements in this space as opposed to just recognizing the opportunity in the space and then saying we're going to build something that does that. The example I would give you is something that we have in our platform that I know others don't is the -- you can have it exactly the same role and exactly the same task at 2 different sites within the same organization, but because of the historical arrangements that has come up to that situation, those compliance requirements are different. So you can't actually assume that just because I have that role in that organization that when I go from one site to the other with one function to the other, that the things that I've currently checked is compliant will then continue to be compliant. That is not something that you can retrospectively go we need to add that to the platform. It's the type of thing that has been designed from the ground up. In terms of our perceptions, you're right, and that is one of the reasons around the company renaming: it is around our focus of getting clarity to our products in the marketplace and getting a broader understanding of all of the roles we play in this space. I mean I mentioned we don't get a lot of credit for the types of revenue profiles that we have and how, even though we have a large amount of revenue coming by the CVCheck product, it is not just transactional revenue. A lot of it is tied to long-term relationships or agreements or other agreements for other services that also generates transactional revenue. So that is an ongoing focus and an ongoing consciousness of both the management and the Board.

Any other questions today?

Thank you, everybody, for making the time. I know it's a busy time of the year, and I always very much appreciate the opportunity to share our story.

Thank you so much, everybody. If you have any questions, please feel free to reach out to myself, [email protected] and we'd be pleased to assist you. Thank you so much, and have a great day.

Thank you.