RPMGlobal Holdings Limited (RUL.AX) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. As the time is now just over 10:00 a.m., I want to welcome everyone on the line to the Annual General Meeting of RPM Global Holdings Limited. My name is Ross Walker, and I'm the current Interim Chairman of the company. Today's meeting is being held online via the Lumi platform. This allows shareholders, proxies and guests to attend the meeting virtually. All attendees, including guests, can hear these proceedings and view the presentation webcast. In addition, shareholders and proxies have the ability to ask questions and submit votes. Questions can be submitted at any time. [Operator Instructions] Please note that while you can submit questions from now on, the questions will not be addressed until the relevant time in the meeting. Please also note that your questions may be moderated, including if we intend to answer that question as part of today's proceedings, or if we receive multiple questions that are similarly targeting 1 topic, we may provide an amalgamated response. Finally, due to time constraints, we may run out of time to answer all of your questions. If this happens, we will endeavor to answer the questions we're able to in due course. Voting today will be conducted by way of a poll on all items of business as permitted by rule 16.13 of the company's constitution. In order to provide you with enough time to vote, I'll shortly open voting for all resolutions. At that time, if you're eligible to vote at this meeting, a new polling icon will appear. Selecting this icon will bring out a list of resolutions and present you with voting options. To cast your vote, simply select one of the options. There is no need to hit a submit or enter button as the vote is automatically recorded. You also have the ability to change your vote up until the time I declare voting closed. I now declare voting open on all items of business. The polling icon will soon appear, please submit your votes at any time. I'll give you a warning before I move to close voting. As we have a quorum, I now declare the meeting open. With me here in RPM's Brisbane Head office is our Chief Executive Officer and Managing Director, Richard Mathews.

Good morning, everybody.

And independent and Non-Executive Director, Steve Baldwin, is also online from Sydney.

Steve Baldwin. Good morning, everybody.

RPM's key management personnel are also here in attendance today. James O'Neill, RPM's Group General Counsel and the Company's Secretary; and Michael Kochanowski, RPM's CFO.

Good morning.

Mr. Tim Aman, RPM's audit partner from BDO is also present.

Good morning.

The meeting has been called under the notice of the meeting issued on the 28th of September 2020, and I propose that the notice of the meeting be taken as read. Before we proceed with the formal items of business, our Managing Director and CEO, Richard Mathews, will deliver a short address. I'll now hand over to Richard.

Thank you, Ross, and good morning to all of our shareholders who are joining us this morning on this new virtual platform. Let me start by addressing the impact of COVID-19 on our business. Almost all of our international employees who make up about 1/3 of our employee base, are operating in semi or full lockdown conditions. 11 of our 21 global offices were either partially closed or fully closed. We have had positive COVID cases in South Africa, Russia, the U.S., Chile and Indonesia. But thankfully, everybody who's caught COVID is recovering or is already fully recovered. We have been very fortunate here in Australia with no positive COVID cases in any of our offices. In terms of the business itself, given RPM is a global company, different teams have been affected differently. Our advisory and software consultant teams have been negatively impacted because they generally are unable to physically travel to our customer sites for meetings, audits, implementations, trainings or the like, which makes it very hard to address the issues that customers need resolving. We are continuing to experiment and refine our approach to remote visits and meetings using various technologies to help us continue to overcome this challenge, as we believe international travel will not return to pre-COVID levels for the rest of this financial year at the earliest. Our software sales team has also experienced a slow start, mainly due to the procurement and legal and customer approvals process for new deals stretching out significantly. While we are still winning larger and larger deals, getting them closed in a timely manner and fashion is a challenge. This means more deals are flowing into our sales pipeline. However, the pipeline itself is stretching out as we slowly grind our way through the approvals processes. So far this financial year, we have signed $3.3 million in software TCV. Now ARR from software subscriptions, which, of course, excludes maintenance and support revenue, has risen to $13.5 million. Despite these challenges of COVID, we have finalized 2 bolt-on software acquisitions. The first thing in July when we acquired Revolution Mining Software based out of Sudbury, Canada who own the scheduling optimization product, which we have slotted into our scheduling suite of products. A few days ago, we announced that we were acquiring another software company, IMAFS, who are based out of Québec, Canada. IMAFS' flagship, software-as-a-service inventory optimization product slots nicely into our asset management suite. We've already received positive comments from our asset management customers who are very interested in this product and believe they will benefit greatly from it. We expect the closure of this transaction to occur at the end of November. That makes 9 acquisitions over the last 6 years, so we're certainly not slowing down. One positive to come out of the global COVID-19 pandemic is an understanding that companies need to be able to operate their businesses remotely, no matter where they or their people are physically located, and software-as-a-service applications do exactly that. One of our key customer service promises is providing our customers with flexible and scalable ways to use our software and cloud-hosted options to support this objective. Our heavy development investment over the last 7 years in moving our products from the desktop to the enterprise enables us to move our applications to the cloud relatively easily. We now have a product which operates in the cloud. And based on this experience, we have committed to accelerating our investment and moving our products into the cloud as quickly as possible. I believe the significant technical advantages we have due to our past investments and given to the cloud before other software-mining vendors will see our first-mover advantage rewarded, as has been seen in other industries. We continue to make great progress in our new design products with B divisions that are seeing excellent feedback from our customers who are putting them through their paces. These products use the latest power network design capabilities, on top of the most advanced software technology and enterprise architecture. I firmly believe these products will provide significant financial returns to our customers who will be able to optimize the future value of their mine much earlier in design process than they can now. While it has been a slower start for the year from a sales perspective, we feel really good about how much more competitive our software products are becoming every day. We have continued to invest heavily in our software products during this challenging time, and believe we will come out of COVID stronger than ever. My current views on the outlook of the business are more upbeat than when we released our annual report in late August. While we acknowledge the world still has a long way to go to seeing off COVID, we are seeing mining companies again, thinking about the future and the investments they need to make to enable them to operate their mines remotely. Our timely move to declare dovetails nicely with their current intentions. We believe that the width and depth of our solution footprint, the investments we have made in integration and our ability to provide remotely operated software will be our competitive advantage going forward. With the IMAFS acquisition and even more value to our asset management suite, we expect this year of our business to have a stellar year. I will now hand it back to Ross to continue with the formal part of the meeting agenda.

Thanks, Richard. And I will now proceed with the formal items of business. The first item of business listed in the notice of meeting is to receive and consider the financial statements and the reports of the directors and auditor for the year ended 30th of June 2020. Please note, there is no voting applicable on this item of business. Instead, this item gives you, as shareholders, the opportunity to ask questions via the Lumi platform about the company and its operations. As such, I'll be pleased to take any comments or questions via the Lumi platform you may have in relation to the audit, the financial report, the Director's report or on the operations of the company. Questions may also be asked to our auditors in relation to the conduct of the audit, the content of the audit report, accounting policies adopted by the company and the independence of the auditor in carrying out the report without the audit. We have not received any written questions prior to this meeting. And as such, I will pause now to see if there are any questions relating to this matter on the call.

Just confirming, Ross, there are no questions on this matter of business.

Thank you. As there are no questions, we will now move to the second item of business. The next item of business is the nonbinding advisory vote on the adoption of the remuneration report. The proxies that have been received for this motion, prior to today's meeting, are being shown on the presentation now. The directors have prepared a remuneration report to 30th of June 2020, which is included in the annual report that has been made available to shareholders. The Corporations Act requires companies to put to shareholders a nonbinding vote to enable shareholders to voice their opinion on the matters in the report. In line with the legislation, this vote will be advisory only and will not bind the directors of the company. However, the Board will take the outcome of the vote into consideration when considering the remuneration policy. The remuneration report for last year for 2000 -- the FY '19, was unanimously passed by a show of hands at last year's AGM. Further, the company did not receive any specific feedback at the AGM nor during the year on its remuneration practices. RPM's remuneration strategy and approach is set out in considerable detail in the remuneration report. So it's unnecessary for me to repeat it now unless anyone has any questions. I would be pleased to take any comments or questions via the Lumi platform you may have in relation to the executive remuneration policies or the remuneration report. And as such, I will pause now to see if there are any questions, relating to this matter on the portal.

Ross, there's only one question relating to exclusions on voting on this matter, and those exclusions related to management and KMP and director shares that are excluded from voting on remuneration. That's the only question that's been raised on this particular action item, is the excluded breakdown of the bottom, which is the sum of all KMPs and directors.

Thank you, Tom (sic) [ James ], then I'll move on. This resolution is being put to shareholders to vote by way of a poll as an ordinary resolution. Your directors unanimously recommend that you vote in favor of this resolution. As Chairman, I advise that I intend to vote all available proxies in favor. I remind key management personnel and their associated parties that voting exclusions apply to this resolution under the Corporations Act and the excluded parties should not vote. Voting will remain open during the course of this meeting. I will now move to the third item of business being the second resolution. The next item of the business is the reelection of Steve Baldwin as a Director of RPM. The proxies that have been received for this motion are being shown on the presentation now. As Chairman, I advise that I intend to vote all available proxies in favor of this resolution, which is being put to shareholders to vote by way of a poll as an ordinary resolution. Steve Baldwin was appointed by the directors effective 1 July 2020 to fill a vacancy created by the resignation of previous Non-Executive Director, Allan Brackin, on 30th of June 2020. In accordance with rule 19.3(b) of the company's constitution, Mr. Baldwin retires from office and, being eligible, offers himself for reelection. Your directors with Stephen abstained, recommend you vote in favor of this resolution and all available proxies will be voted in favor. Stephen's biography and qualifications were detailed in the notice of meeting. As such, I don't propose to go through those again here, however, Stephen and the Board would be happy to take any comments or questions you may have in relation to Stephen's appointment via the Lumi platform. So I'll now pause if there are any questions relating to this matter on the portal?

Ross, I confirm there are no questions related to this matter of business.

Very good. As there are no questions, I move that Steve Baldwin will be elected as a Non-Executive Director of RPMGlobal Holdings Limited. Voting will remain open during the course of this meeting. So I'll now move on to the fourth item of business being the third resolution. The last formal item of business is the resolution to approve the ability for RPM to issue additional capacity of securities under ASX Listing Rule 7.1A. The proxies that have been received for this motion are being shown on the presentation now. As Chairman, I advise that I tend to vote all available proxies in favor of this resolution, which is being put to shareholders via vote by way of a poll as a special resolution. By way of background, our ASX Listing Rule 7.1 allows RPM to issue a maximum of 15% of its issued capital in any 12-month period without requiring shareholder approval. Under ASX Listing Rule 7.1A, eligible entities, being companies that are outside the S&P ASX 300 Index and have a market capitalization of $300 million or less, can issue a further 10% on top of the 15% committed by ASX Listing Rule of their share capital in 12 months on a nonpro-rata basis. RPM is an eligible entity at this time and must remain compliant with the requirements of ASX Listing Rule 7.1A to be able to utilize the additional capacity to issue shares under that listing rule. RPM has obtained shareholder approval on this resolution at each AGM over the last 7 years since 2013, and has only used shares available under this resolution twice, with the last time being in September 2016. That said, the ability of RPM to issue shares under ASX Listing Rule 7.1A is subject to shareholder approval each year by way of a special resolution at an annual general meeting, meaning that this resolution requires greater than 75% of eligible votes in order to pass. The expansion memorandum to the notice of meeting contains further details regarding this resolution. The directors unanimously recommend that you vote in favor of this resolution. As Chairman, I advise that I intend to vote all available proxies in favor. I would be pleased to take any comments or questions via the Lumi platform you may have in relation to this resolution.

Ross, I confirm there's no questions on this particular matter.

Very good. I note that the resolution rules prohibit voting on this resolution by any person who may participate in the proposed issue or might obtain a benefit and their associates. However, the date of this meeting, it is not known who may participate in a proposed issue of shares under this proposal. So as such, no shareholders are currently excluded. Further business. Before I move to close the voting on the meeting, shareholders are invited to ask any further questions via the Lumi platform or to raise any other business which may lawfully be brought before the meeting.

Ross, I confirm the only question that was on the portal had related to a matter that has already been interested during Richard's presentation. So as such, there are no further questions.

Thank you, James. Ladies and gentlemen, as there are no further questions from our moderator, that concludes our discussion on the items of business. In a couple of minutes, I will close the voting system. Please ensure that you have cast your vote on all resolutions. I will now pause to allow you time to finalize these votes. [Voting]

Ladies and gentlemen, voting is now closed. The results of these votes, together with the proxies already received, are being tallied and audited by RPM share register representatives and will be released to the stock exchange later today. Before formally closing the meeting, I would like to thank our shareholders for supporting the company and for your continued support of the Board and management team. There being no further business, I now declare the annual general meeting closed at 10:20 a.m. Thank you for all your attendance and interest, and we look forward to your continued support in the coming year. Thank you all.