Qoria Limited (QOR.AX) Earnings Call Transcript & Summary

Good morning all here on the East Coast. Just ticked over to good afternoon. Obviously, a very exciting day here in Perth. We got the cricket [indiscernible] way so those who want to go can go. So welcome to the Annual General Meeting of Qoria Limited. For those of you who do not know me, my name is Peter Pawlowitsch. I'm the Non-Executive Chairman of Qoria. Joining me here today in the room are Non-Executive Director, Phil Warren; and Company Secretary, Stephanie Majteles. Our Managing Director, Tim Levy, is online as is our Non-Executive Director, Jane Watts. We have representatives from the company's share registry, Computershare who is assisting with registration and poll and the auditor from BDO is here with us. Apologies. Non-Executive Directors Georg Ell and Matthew Stepka are online due to time zone commitments. Shareholders -- some procedural things. Shareholders are only able to attend this Annual General Meeting in person or anyone can watch online. It will not be possible to use the online facility to vote on any resolutions or ask questions related to the resolutions during the meeting formalities as only verified shareholders and proxy advisers are entitled to vote and ask questions on the resolutions. Although at the end of Tim's presentation, we will enable anyone to ask questions on matters of the company. So if you submit your questions in the chat function, then I'll ask them. So I have satisfied myself in accordance with the company's constitution, a quorum is present. I therefore declare this meeting open. Tim, over to you.

All right. Great. Thanks, Peter. Let me just pull up a brief presentation. So we put this out on the platform today. So what I'll do today is quickly cover off where we've got to as a company and some things that we're thinking about in the medium term, where the company is going. So let's go. Okay. So we believe we're leading now in online safety, child safety in our chosen markets, which are principally the U.S., the U.K. and private schools in Australia and independent schools in New Zealand. And our Qustodio consumer product is also starting to be looking -- seen in the market for what it is the leading parental control products globally. Now over the next 3 years, now we've got that platform, what next. And for us, it's a focus on streamlining and unifying the business, the future of safety with AI capabilities inside of our platform, sensible product extensions and obviously, expansion globally. And I'll talk -- we're doing a lot of those things, but I want to talk a bit more about those today, but all the while making sure we're delivering strong growth and profitable growth. In particular, these are mantras inside our business. So where are we at right now? We believe this idea of an integrated solution that supports all the custodians of a child, be that parents, school admin, school IT, teachers and well-being people, we believe that's going to be the reason that we win this category and all the signs are -- is that that's working. Certainly, when I listen to sales calls, particularly big districts in the U.S., it's that engagement with the parent community that is really standing out as a key point of difference. And so that bet that we made 10 years ago when we started this business, I feel like is really starting to play through. Today, we look after 27 million kids, which is more students -- more kids than there are Australians on the planet, which is a huge achievement. 8 million parents use our platforms daily, 32,000 schools. We have customers in more than 100 countries globally, and we have about 650 staff actually now across the world. Now this is new. I haven't shared this data before with the market or the world really. And it's what we're now starting to show is through the many years that we've been doing these things is the efficacy, the impact that we're making on students' lives and within school communities. There's a lot more data to come, but this one is a really interesting one. I think the market would like to see. What you're seeing here is a correlation. This is 2.2 million students, by the way. So it's a big sample of students that are using our digital monitoring product in the U.S. And so what we're doing is correlating the number of products, Qoria products that, that school has to the number of bullying incidents and safety concerns that schools have. So all of those customers, all of those kids are monitored using our digital monitoring product. So that's that one product column. And so in that -- if a school client of ours in the U.S. is monitoring only, then they're experiencing 0.16 bullying incidents per 1,000 students per week, still a high number. Now the more products you have of ours, classroom management, filtering, firewalling, student engagement, parental controls, you name it, the more products you get, you can see it's highly correlated to a reduction in toxicity. I mean there is no better demonstration of the efficacy of this platform approach, this ecosystem approach to online safety and most particularly bringing the parents into the safety programs of schools. There is no better evidence of the efficacy of what we're doing than that chart. So everybody who's been part of this business, investors included, you should be really proud of what we've achieved because now we can show the data points for the impact we're making on people's lives. Now going even a bit more heart wrenching. This is an escalation that came through our business today, which I think is a really interesting and important reminder poignant reminder of what we do. And let me read it for those that may not be able to see the screen. So this is a message that's come from one of our success teams in the U.S. I just got off a call with, name redacted, who was in charge of monitoring for their district. Last night, a student armed herself and started to reach out for a crisis line online to say she was about to harm herself more. The customer got the alert and called -- sorry, our team got the alert and called the mom, who insisted the child was sleeping and to her shock, that was not the case. The child is now on the care of the hospital. Mirabel, who's our staff member, said her bucket is continuously filled by our product. So all of us have literally intervened in a situation where a child has a tomorrow that they would not otherwise have had. This incident happened overnight. Okay. So let's get into more financial numbers. So over the last 4 years, we've seen a steady rise in our ARR, but what we've seen in particular is an acceleration in the last 12 months. And that's because we're really getting a mojo together. The product is starting to make a lot of sense. We're unifying elements where it makes -- priority elements. We're building brand name, particularly in the U.S. Bigger districts are starting to chase us. Statewide deals are starting to come to us. And of course, the Qustodio business is really starting to accelerate as well. We added millions of students to our platform last year. But it's not single products or single markets. It's essentially all of our products, certainly our core products, filtering and firewall and classroom management and digital monitoring, the K-12 products are rapidly growing. And then the Qustodio product, whilst it grew, I think, around about 20% last year, September's growth this year has suggested growth well north of 30%, which we could grow faster, but we're also being very mindful of making sure we're hitting our guidance. So the business is growing in all regions and essentially growing in all products, and that's contributing to what I think you'll see in the next few slides, which is the leverage that we're seeing in that business. So again, talking about Qustodio, I'm banging on a lot about this, I know. But it's now -- it's -- our investments in the product development and marketing beyond just straightforward performance marketing is really now starting to accelerate. We're seeing much higher growth in subscriber numbers, much higher -- much more accelerated growth in ARR. But also importantly, that chart on the bottom right is showing that those investments are actually driving up the lifetime value of these customers. Essentially, we're getting better customers, more qualified customers that are sticking with that business for a longer period of time. That is a huge asset. We're still delivering ROI in that business of north of 300%, which means as the K-12 and our overall business starts to contribute more profits, we'll be able to put more of that into accelerating that Qustodio business. And this was touching before. So all of that great work with growth, cost control, focus on our cost of selling, channel commissions and so on all of our direct costs is now opening up the jaws to profitability. Last year, we achieved nearly 15% EBITDA margins. This year -- this current financial year, we're promising to better that in the order of 20% or better. And you see that, again, the important chart on the right-hand side is the leverage that we have in our business. Our average revenue per student net of channel commissions is what you're seeing there. Sorry, that's the ARPU. That's gross revenue per student from our students is coming through less our direct costs, which are essentially flat. And so our margins are opening up as long as we can keep maintaining our fixed costs relatively flat, which we've done in the last few years, then this business becomes very profitable very quickly. Okay. So what next? So we've built this platform. What do we think about next beyond just the promise of delivering that profitable growth, which is encapsulated in our recent guidance. Well, streamlining unifying is very important. We've acquired 8 businesses over the last 10 years. And I think that chart down there on the right shows a really good story, which is we've been able to absorb these businesses, bring them together technically and culturally and then accelerate organic growth on top. Some of our key achievements in my view is that you see a highlighted second bottom item on the dot points there is strong staff engagement. We almost have 0 regrettable staff attrition. We've been amazing at picking the right businesses to bring into our business, picking the right team and talent and then working on a very purpose-driven culture, encapsulated with some of the results that you're now seeing. So that's now I think we're seen very clearly across the industry that we're in as a great platform and not only technically but also a platform for people to forge their own careers. And the next thing for us, I guess, is beyond M&A work is doubling down on our successes. We've got just to punch through 20% of students in the U.S. on our platform, which is an extraordinary achievement. I probably should have announced that. So what next with there? Well, we're going to drive growth in our top 100 U.S. school districts. That's a huge emphasis for this year. So we're now known across that -- across the U.S. So now let's double down and grow there. We're lifting investments in Qustodio, making sure that we're not impacting our guidance, but that's a huge opportunity. We're expanding reseller networks. We recently announced a partnership with CDW, which is the biggest reseller network in the U.S. But of course, we have a whole range of reseller partnerships, including MSPs and a whole range of buying groups in Europe, which I'll talk about in another investment session, but that's all going very well as well. And then finally, driving cross-sells. We've got about 1.8 products per customer in the U.K. and about 2.6, I think it is in the U.S. Those numbers should be doubled in the next 3 years, and that offers massive opportunities for growth and profit for our business. All right, Unification. We talk about this a lot. It's simplifying our code base is bringing all of our capability, making it available to all of our customers globally. It is a big and complicated piece of work. And what this diagram or this chart is trying to show is the elements, the components, the major technical components in our various platforms that we have merged with and how we're progressing and plan to progress over time to consolidate them into a single stack. The emphasis in 2025 has been mostly around the cloud components that will allow us to link the Limewize platform, which is our U.S. platform to the in-line Smoothwall platform, which is in the U.K. That's pretty much done now, and we're in the final stage of bringing that Limewize platform to the U.K. as what's going to be known as Qoria. So that should be launched -- the first version of that should be launched in March. And by the end of '25 -- I'm sorry, the end of '26, all schools in -- existing school clients in the U.K. will be able to access all of our capability and most importantly, and as importantly, sorry, some of the unique capability that we have in that Smoothwall platform will also be available for the U.S., which will kind of give us another leg of growth and pricing opportunities in the U.S. So by the end of '26, all products will be available in all markets and then '27 really is focused on the unified experience and kind of making sure that all customers when they sign to our platforms feel like it's a unified single experience, again, across whatever capability you choose. Okay. AI, look, what next, you can't not talk about AI. It is reshaping everything we're doing in our business. Of course, for schools, when AI started to take off 2, 3 years ago, their concern was about academic dishonesty, and that still is true. Today, there is an ongoing cat and mouse game with schools trying to deal with the -- how do you assess kids with their ability to grab these tools and cheat. But then those concerns are rapidly evolving to some other things. That's the use of AI tools, the behavioral implications of kids forming intimate relationships with AI tools is causing serious mental health challenges, and that's something that we're being asked about constantly, and our platform is obviously designed to support with. But then this emerging challenge also of maybe you could simplify it and call it the dumbing down of the generation. It's the impact on cognitive development and critical thinking skills when the answer is available to you instantly always. So these are the big 3 areas of concern for educators beyond just the kind of workflows of operating inside the classroom. And we think we've got a good story to tell. We're working on some things in the background, which we're hoping to launch next year. We see our role as across everything that we do actually is to provide the kids that are monitored by our platform, the teachers, the safety leads and the parents with the kind of tools to give them the ability to make the right choices for them in that moment. So I'll talk more about that soon, but there's a lot of work going into that. In the meantime, we're doing a lot of stuff on cost structure, let's say, improving the way that we develop software, using automation to improve our processes like digital monitoring and using AI tools to improve the way that we categorize behavior and access to the Internet. So mountains of work going. We've saved literally millions of dollars a year of costs already through the use of AI tools across our various platforms. And then obviously, beyond our existing business, what next for us. This diagram, I hope, provides some -- an insight to the way we think about it. There is core K-12 online safety, which is where we've been focused today. And then us and our market have been innovating to essentially expand our TAM through introducing things like AI tools, AI filtering, data analytics is something that we've done recently. Now some of our competitors are going beyond that into areas of physical safety, hall pass systems and visitor systems and dismissal systems. One of our competitors, Lightspeed Systems, has recently introduced a virtual mental health support. And then, of course, there's security, which is an obvious adjacency to what we do because our CTOs are buying that product as well. But beyond those natural adjacencies to the safety proposition, there's obviously a lot of things that we could do in consumer. We already have a parental control capability, but there's clear concerns with mental health in the community location tracking, the Life360 sort of capability. Parent communications is a big category. And of course, consumer endpoint security is an obvious extension of our promise to keep families safe and secure. These segments are massive. We will be careful. We're not in a hurry. In the areas of green, we're dominant and doing really well. We don't need to step out to the gray areas, but where it makes sense to do so, we will do so. But again, for all investors to be clear, nothing that we do will impact our promises with respect to profitability, cash flow or growth. And then there is also -- we have an eye on what next, right? So if we're dominant in the English-speaking world, where next? And we have a business -- there's 2 things I'd like to bring your attention to. One is we have a small business in Spain that sells to international schools globally. We're building up a footprint of international partnerships and revenue. And it will from probably the end of next calendar year, if not early '27, become a real focal point for us to expand outside of the English-speaking world in our K-12 products. By that stage, we'll have a fully multilingual or what's called as internationalized platform so we can sell that product set aggressively in all markets, so not just where those markets that are comfortable in English user interface. Now the non-English-speaking world and [indiscernible] is dominated by state-based approaches to student safety. Think about it like a New South Wales education department, which has bought a filtering -- a firewall solution from Palo Alto, maybe in partnership with an MSP, and that's providing filtering in the network. That's often how it works in the international markets. And so I put these logos of MSPs and telcos there because that's probably going to be a big part of our international growth story is building partnerships with telecommunications providers. These are telcos that we already have partnerships with and MSPs and firewall providers to layer our cloud services on top. That's not a punt. We know that there are existing business models, including some in Australia that do that today. So that will become a bigger part of our focus as we shift into enterprise partnerships in, as I said, end of '26, early '27. So we plan to double down on the English-speaking markets, as I said before, but then we're positioning. We're getting ready in our business to have that next leg of growth in those other markets. That's really -- I hope that was helpful, and hopefully, I didn't take up too much time, Peter, over to you.

Thanks, Tim. So there's no questions so far. So I'm just going to proceed with the formal business and check again at the end if there's any questions for you, Tim. Just one comment. Some of those seeing the impact we can have in those harm events we save from we never lose sight of as a company. And the impact you can see happening with the bullying with the more products being rolled out is amazingly fantastic, and you can see why what we do is so important and why we need to be successful. Okay. Formal items. You received a copy of the notice of meeting -- you received a copy of the resolutions with your notice of Annual General Meeting. Unless there are any objections, I will take the notice as read. The Annual General -- notice of Annual General Meeting contains a total of 6 resolutions. We are required to have voting complete at all shareholder meetings via poll. As noted in the notice of meeting, shareholders cannot use the webcast facility to vote on the resolutions. In respect of the poll voting process, all shareholders who have submitted a proxy form prior to the meeting don't need to take any further action as their votes are already counted. If you have not already voted, you have been provided a poll form on entry to the meeting. All poll forms will need to be submitted at the end of the meeting by handing to the Computershare representative. Proxies. Proxies have been received totaling 844,048,914 shares, representing approximately 62.33% of the total number of shares on issue in the company. I think that's a record for us. The details of the votes on each resolution will be detailed on the screen behind me and on the screen as I read resolution. Shortly after the resolution, we'll collect poll cards and close the poll. The results of the meeting will be made available on the ASX. Voting exclusions. Where voting exclusions are relevant, those votes have been excluded from the resolution. Resolutions 1, 4, 5 and 6 are subject to voting exclusions as detailed in the notice of meeting. If shareholders wish to ask questions during the meeting, I'll confirm the [indiscernible] after reading of each resolution for the questions relating to that resolution. I will now move to the agenda items. The annual report. The first item for business is to receive and consider the company's annual report for the year ended 30 June '25. There is no voting on this item. Instead, shareholders have the opportunity to ask questions about the company's financial performance and operations over the past year. Jarrad Prue, our auditor from BDO, is with us today. Questions relating to the auditor's report and the company's accounting policies may be directed to Jarrad through me as Chairman. Are there any questions on the annual report? All right. Resolution 1. I refer to the proxies for resolution 1 displayed on the screen. That, for the purposes of Section 250R(2) of the Corporations Act and for all other purposes, the remuneration report, which forms part of the directors' report for the financial year ended 30 June 2025 be adopted. Are there any questions? No. All right. Resolution 2, reelection of Mr. Philip Warren. I refer to the proxies for resolution 2 displayed on the screen. That, for the purpose of Article 6.3(b) and 6.3(c) of the company's constitution, Listing Rule 14.4 and for all other purposes, Mr. Philip Warren, who retires by rotation and, being eligible, offers himself for reelection, is reelected as a director. Are there any questions? Next resolution 3. Reelection of Mr. Georg Ell. I refer to the proxies for resolution 3 displayed on the screen. That, for the purpose for Article 6.3(c) of the company's constitution and for all other purposes, Mr. Georg Ell, who retires by rotation and, being eligible, offers himself for reelection, is reelected as a director. Any questions? No. Resolution 4. Grant of managing director securities to Mr. Tim Levy. I refer to the proxies for resolution displayed on the screen. That, pursuant to and in accordance with Part 2D.2 of the Corporations Act, including Sections 200B and 200E of the Corporations Act, Listing Rule 10.14 and for all other purposes, shareholders approve the grant of up to: 750,000 STI financial year '26 options, 750,000 LTI financial '28 options and 800,000 TSR financial year '28 options under the plan, including the issue or transfer of shares on the vesting and exercise of those options to Mr. Tim Levy and/or his nominees on the terms and conditions set the exploration memorandum. Any questions? Resolution 5. Approval of employee incentive securities plan. Refer to proxies for resolution 5 displayed on the screen. That, for the purpose of Listing Rule 7.2 Exception 13(b), section 260C(4) of the Corporations Act and for all other purposes, shareholders approve the renewal of and the company's adoption of the company's employee incentive securities plan, the grant of any securities under the employee incentive securities plan and the issue of underlying shares of such securities in accordance with the employee incentives securities plan, in each case on the terms and conditions set out in the explanatory memorandum. Any questions? No. Resolution 6. Approval of termination benefits. I refer to the proxy votes on resolution 6 provided on the screen. That, pursuant to and in accordance with article 6.5 of the constitution, Part 2D.2 of the Corporations Act, including Sections 200B and 200E of the Corporations Act and for all other purposes, shareholders approve the giving of benefits detailed in the explanatory memorandum in connection with any person who from time to time is or has been a member of key management personnel or holds or has held a managerial or executive office in the company or related body corporate, ceasing to be a member of the key management personnel, ceasing to hold that managerial or executive office or ceasing to hold a subsequent office, or position of employment, in the company or related body corporate relevant personnel. This approval applies for such benefits given to the relevant personnel or any other person in the period to the conclusion of the third Annual General Meeting of the company after the date on which this resolution is passed. Any questions on that one? No. Poll. Can all shareholders now complete their voting cards and lodge them with the Computershare. [Voting]

I now declare the meeting closed. We'll now [indiscernible] released. Any questions coming in for Tim while we are doing that? No questions. Okay. Thank you. That being the conclusion of the Annual General Meeting, I declare the meeting closed at 9:30 a.m. first time. Thank you all for attendance, and look forward to seeing you on future webinars when Tim is giving further updates about the business.

Thanks all. Thanks, Pete.

Bye.