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

Good morning, ladies and gentlemen. As the time is 10:00 a.m. in Brisbane, I would like to welcome everyone online to the Annual General Meeting of RPMGlobal Holdings Limited. My name is Steve Baldwin, and I'm the company's Chairman. As we have a quorum, I now declare the meeting open. Today's meeting is being held online via the Lumi platform. This meeting platform allows shareholders, proxies and guests to attend the meeting virtually. All attendees can watch a live webcast of the presentation and audio of the meeting. In addition, shareholders and proxies can ask questions and submit votes. Questions can be submitted at any time. However, please note that while you can submit questions from now on, I will not address them until the appropriate time of the meeting. Please also note that your questions may be moderated if we receive multiple questions on 1 topic, amalgamated together. Finally, due to time constraints, we may not get to answer all of your questions. If this happens, we will endeavor where appropriate to answer them in due course by e-mail and/or ongoing disclosures to the market. To ask a question, select the messaging tab at the top of the Lumi platform. At the top of that tab, there is a section for you to type your question. Once you have finished typing, please hit the arrow symbol to send. For those shareholders who wish to ask a verbal question, an audio questions facility is available during the meeting. To use this service, please pause the broadcast of the Lumi platform and then click on the link under asking audio question. A new page will open and you will be prompted to enter the topic of your questions before being connected. You will listen to the meeting on this page while waiting to ask your question. If you have any issues using the system, please return to the Lumi platform. The meeting today has been called under the Notice of Meeting issued on 24 September 2021, and I propose that the Notice of Meeting be taken as read. In RPM's Brisbane office, head office today is our Chief Executive Officer and Managing Director, Richard Mathews; one of our nonexecutive directors, Ross Walker. And also joining us remotely is one of our nonexecutive directors, Angeleen Jenkins.

Good morning, shareholders.

RPM's key management personnel are also in attendance in today's meeting. From RPM's Brisbane office, we have James O'Neill, our Group General Counsel and Company Secretary; Mr. Tim Mann (sic) [ Aman ], who's RPM's audit partner from BDO Audit, is also present in RPM's Brisbane office. Before we proceed with the formal items of business, our Managing Director and CEO, Richard Mathews, will now provide an update on the RPM business.

Yes. Thanks, Steve, and good morning to all our shareholders. Thanks for joining this virtual platform this morning. Well, I guess all of our employees worldwide have been impacted by COVID in one way or another. I would like to take a moment just to thank the HR team and the management teams for their laser-like focus on employee well-being during this difficult time. Thankfully, all of our employees who unfortunately did contract COVID have now fully recovered. The shutdown of international travel and state borders within Australia due to COVID did adversely affect our advisory and software consultant business in the first half of last year. We have introduced alternative approaches to compensate for not being able to visit our customer sites using technology and third parties. However, nothing beats spending time with your customers on their sites. Once international travels resume, we will naturally see an increase in customer satisfaction and revenue. COVID's impact on our software business has predominantly been limited to stretching out the procurement, legal and customer approvals process. While the time between being awarded a deal and closing a deal has lengthened, deals are still closing. We believe our continued above industry average investment in software development during this pandemic has made our software products more competitive and we're seeing our market share continue to grow. The business has started financial year 2022 strongly. At the end of our first quarter, advisory revenue was up 60% on the same period last year, and software consultant revenue was up 70%. Both divisions are currently hiring to meet customer demand. So far this financial year, we have already signed $10.2 million in software TCV, up 209% from the same time last year. We've certainly got a great start in what is always our slowest quarter due to the Northern Hemisphere holiday season. We may have $68 million in precontracted software subscription revenue, which will be recognized in the future years, up $33.5 million from the same time last year. Now all of this revenue is contracted and none of it subject to termination for convenience provisions. It's also worth noting that since the beginning of this financial year, the company has also finalized the allocation to Pacific mining sites software held in inventory by a global miner to the value of $2.2 million, which is not included in about $10.2 million TCV number. These site allocations relate to software licenses that were bought and paid for by that company in prior reporting periods and held as inventory being the rollout by the customer of future mining sites. This $2.2 million was reported by RPM as perpetual software license revenue in previous reporting periods, and therefore, has not been included in the company's year-to-date TCV number. All customer inventory is now being fully depleted out of all of our customers. The company's ARR from software subscriptions, excluding annual recurring revenue for maintenance and support revenue from perpetual license sales, which have been sold in the past, has increased by $2 million by the end of 2021 and the assets at $23.9 million. This lift in revenue has in resulted in the company's EBITDAR for the first quarter increasing by 280% to $4.3 million compared against the same period last year. So we really have got off to a fly. EY's recent annual survey of mining executives identified that economic, social and governance risk is the #1 risk facing global miners. Because of the strategic conversations our advisory professionals have been having with their clients on an ongoing basis, we were able to identify this rapidly developing industry risk early and committed to building an ESG division focused on mining. In July 2021, we acquired Nitro Solutions Pty Ltd, a Brisbane-based ESG mining advisory business. At the same time, we centralized all of our ESG professionals from around the world into one division under one leader. When we announced this acquisition, we made it clear that this was just the start of our ESG journey and that the company intended to build the global mining-focused ESG offering. As a continuation of the strategy, we followed the Nitro acquisition by acquiring Blueprint, a Perth-based ESG mining advisory business, in September. Both acquisitions have already beaten our best financial expectations. Combining in-sourced ESG skills with RPM's high-quality global brand and customer base is seeing a significant uplift in demand for our advisory services. This makes 11 acquisitions during the last 7 years, and we're certainly not slowing down. Well, we're another 12 months through the transition of our software products to the cloud and there was not a doubt in our minds that this is the right strategy for our software products. After 7 years of transitioning RPM's product suite from the desktop to the enterprise has ensured a strong foundation for our move to the cloud and our customers are cheering us on in this endeavor. As with all good things that are done, it takes time and money to move all of our products into the cloud. We estimate that in another 12 months, most of our products will be cloud-enabled, the last few being completed inside 18 months. In September, we divested the GeoGAS business to its management team. This business was 100% focused on coal production and exploration. Therefore, it was not aligned with our long-term strategic direction to assist the mining industry in reducing its carbon footprint and thereby helping to reduce its impact on climate change. High quality continuous service for GeoGAS underground coal mining customers was central to the Board's support of an [indiscernible] and productization of that business. Certainly, GeoGAS' customers have been very supportive of this approach. The divestment of GeoGAS means the company once again has 2 core and complementary, very complementary businesses, software and advisory. Certainly, our asset management software, AMT, and scheduling execution software, XECUTE, in particular, have higher demand, which are seeing us add development and consultant staff to support their strong growth. In addition to the growth in our current products, we are very excited about our pipeline of new software products, which we will introduce to the market during this financial year. We're working with Glencore on our advanced AMT mobile maintenance application; [indiscernible] on our gas drainage module for underground scheduling products; [indiscernible] on our [indiscernible] optimization module for XECUTE; and BHP on a state-of-the-art multi-utility optimizer. This is the most extensive list of new product releases in the company's history, and we'll be excited to see how each of them are accepted by the market. As we transition our products to the cloud, we will be releasing new cloud versions to the market throughout the year. Our push to advance the mining industry's drive to decarbonize it has seen us introduce support for electric vehicles across our product suites. We are currently adding support for hydrogen vehicles and are working with our new ESG team to identify the next set of software development advancements. There's certainly a momentum in the mining industry. Metal miners are investing in the operations. There is strong demand for ESG services. Companies are looking to technology to enable them to operate their mines remotely and more profitably. As I said earlier, our advisory and software divisions have gotten off to a fast start. We invested another $13.2 million on software products last financial year. So we have a more complete and richer set of products than we did this time last year. We will be releasing 4 major new software products during the year and continue to move our products up to the cloud. With a strong balance sheet, healthy cash flow, claiming of M&A opportunities, competitive advisory and software offerings and new in-demand software products in the development pipeline, there is no doubt that the company is in the best shape it's ever been in. I'll now hand back to Steve to continue with the formal part of the meeting.

Thank you, Richard. I will now proceed with the formal part of proceedings. The meeting is being called under the Notice of Meeting issued on 24 September 2021. 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 reservations. If you are eligible to vote at this meeting, a new voting tab will appear. Selecting this tab will bring up a list of resolutions and present you with voting options. To 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 do, however, 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 voting tab will soon appear. Please submit your votes at any time. I will give you a warning before I move to close voting towards the conclusion of today's meeting. [Voting]

The first item of business is to receive and consider the financial statements and the report of the directors and auditor for the year ended 30 June 2021. Please note, there is no voting applicable on this side of the business. Instead, this item gives you, our shareholders, the opportunity to ask questions via the Lumi platform about the company and its operations. Any questions in relation to executive remuneration policies will be considered when we come to the next item of business covering the adoption of the remuneration report. Questions may also be asked of our auditors, BDO, in relation to the conduct of the audit, the content of their audit report, accounting policies adopted by the company and the independence of the auditor in carrying out the orders. As such, I would be pleased to take any comments or questions via the Lumi platform you may have in relation to the audit, the financial report, the directors' report on the operators of the company. We have not received any written questions for the auditors prior to this meeting. And as such, I will now pause to see if there are any questions relating to this matter on the portal. James, have we received any questions relating to the financial accounts?

Steve, no questions on this matter.

Thank you, James. As there are no further questions, we'll 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. Directors have prepared a remuneration report to 30 June 2021, 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 of this report. In line with the legislation, this vote will be advisory only and will not bind the directors of the company. The Board, however, will take the outcome of the vote into consideration when considering the remuneration policies applicable to the company. The remuneration report for last year being the 2020 financial year was passed by poll at last year's AGM. Further, the company did not receive any specific feedback at that AGM nor during the year on its remuneration practices. RPM's remuneration strategy and approach are set out in considerable detail in the remuneration report, so it is unnecessary for me to repeat it now. I would be pleased to take any comments or questions via the Lumi platform you have in relation to executive remuneration policies or the remuneration report. And as such, I will now pause to see if there are any questions relating to this matter on the portal. James, have you received any questions on the remuneration report?

No, Steve. No questions on the portal.

It 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 of this resolution. I will remind key management personnel and their associated parties that binding exclusions apply to this resolution under the Corporations Act, and excluded parties should not vote. Voting will remain open during the course of this meeting. I will now move on to the third item of business. The next item of business is the reelection of Paul Scurrah as a Non-Executive 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 to this resolution, which is being put to shareholders to vote by way of a poll as an ordinary resolution. Paul Scurrah was appointed by the directors effective 1 January 2021. In the course of Rule 19.3 subsection B of the company's constitution and the ASX Listing Rule 14.4, Paul retires from office and being eligible offers himself for reelection. Your directors, with Paul abstaining, unanimously recommend that you vote in favor of this resolution and all available proxies will be voted in favor of this resolution. Supporting details of Paul's extensive experience were itemized in the notice of meeting. And as such, I don't propose to go through those again here. However, I would be happy to take any comments or questions you may have in relation to Paul's appointment, via the Lumi platform. James, have you received any questions related to the reelection of Paul as a director?

No, Steve, no questions on this matter.

As there are no questions, I move that Paul be reelected as a Non-Executive Director of RPMGlobal Holdings Limited. Voting will remain open during the course of this meeting. I will now move to the fourth item of business. This item of business is the reelection of Angeleen Jenkins as a Non-Executive Director of RPM. The proxies that have been received for this motion have been 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. Angeleen Jenkins was appointed by the directors effective 1 July 2021. In accordance with Rule 19.3 subsection B of the company's constitution and also ASX Listing Rule 14.4, Angeleen Jenkins retired from office and being eligible offers herself for reelection. Your directors, with Angeleen abstaining, unanimously recommend you vote in favor this resolution, and all available proxies will be voted in favor of this resolution. Angeleen's biography and qualifications were detailed in the Notice of Meeting, and as such, I don't propose to go through those again here. However, Angeleen and the Board will be happy to take any questions or comments you may have in relation to her appointment by the Lumi platform. James, have you received any questions relating to the reelection of Angeleen as a director?

No, Steve, no questions on this matter.

Thank you, James. As there are no questions, I move that Angeleen be reelected as a Non-Executive Director of RPMGlobal Holdings Limited. Voting will remain open during the course of this meeting. I will now move on to the final item of the business on today's agenda. The last formal item of business is the resolution to amend the company's constitution. The proxies that have been received for this motion are being shown on the presentation now. A copy of the existing constitution of the company showing the proposed amendments is attached in the AGM Notice of Meeting and is also available from RPM's website or from James, our Company Secretary. This is a special resolution to amend the company's constitution. And it's being proposed to ensure that RPM can convene a physical general meeting that is linked to one or more separate meeting places or virtual general meeting using technology. The existing constitution of the company contemplates that any general meeting will be held at a physical meeting place with the potential to link a separate meeting place of the main meeting place by instantaneous audio visual communication device, but does not contemplate the holding of a general meeting at two or more places or virtually using one or more instantaneous audio visual communication devices or audio and visual or virtual communication technology. During the course of the current COVID-19 pandemic, RPM has taken advantage of various [indiscernible] and other measures, including ASIC's no action position for our companies to hold general meetings virtually using technology. Such measures are, however, temporary. Reported amendments to the company's constitution will enable RPM to continue to hold general meetings using technology, either physical, hybrid or virtual, after such measures have lapsed. Under Section 136 Subsection 2 of the Corporations Act, a company can modify or repeal its constitution or a provision of its constitution by special resolution of its shareholders. A special resolution is a resolution passed by at least 75% of the votes cast by shareholders entitled to vote on the resolution. In addition to the above, Rule 2.5 of the company's constitution relating to restricted securities is also proposed to be amended to comply with the technical requirements of ASX Listing Rule 15.12, as introduced effective 1 December 2019. The Board considers that the proposed amendments to the company's constitution are in the best interest of shareholders. Under Section 136 subsection 2 of the Corporations Act, a company can modify or repeal its constitution or a provision of its constitution by special resolution of its shareholders. The special resolution is a resolution passed by at least 75% of the votes cast by shareholders entitled to vote on the resolution. If approved, the new constitution replaces the existing constitution in its entirety and will be effective from the close of this meeting. Your directors unanimously recommend that you vote in favor of this resolution. As Chairman, I advise I intend to vote all available proxies in favor of this resolution. I would be pleased to take any comments or questions you may have in relation to this resolution. James, have you received any questions relating to this resolution?

No, nothing in respect to the constitution change, Steve.

Thank you, James. As there are no further questions, I'll move that the company adopt the near constitution on the terms disclosed. Voting will remain open during the remainder of this meeting. Before I move to close voting at this 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 this meeting. James, are there any other unanswered questions.

There's nothing on the board at this stage, Steve.

Thank you, James. As we have no further questions, that concludes our discussion on the items of business. I will shortly close the voting system. Please ensure that you've cast your vote on all resolutions. I now propose to pause for 90 seconds to allow all shareholders time to finalize their votes. [Voting]

Thank you. I believe 90 seconds has now elapsed and I will now close the voting. The results of these votes, together with the proxies already received, are being tallied and audited by RPM share register representatives at Computershare and will be released to the stock exchange later today. Before closing the meeting, I would like to thank our shareholders for supporting the company and for your continued support of the Board and the management team. Thank you all for your attendance at this meeting and your interest in the company. And we look forward to your continued support in the coming year. There being no further business, I now declare the Annual General Meeting closed. Thank you.