TruFin plc (TRU) Earnings Call Transcript & Summary

Good afternoon, and welcome to the TruFin plc Final Results Investor Presentation. [Operator Instructions] Before we begin, I would like to submit the following poll. And I would now like to hand you over to CEO, James Van Den Bergh. Good afternoon to you, sir.

Good afternoon, Alex. Thanks very much, and thank you, everyone, for joining today. I have with me today, James Hussey, who's the CFO of TruFin. So thank you all for joining. As Alex said, what we're going to do is we're going to run you through our results presentation, and then we're going to leave plenty of time for questions at the end. So you can submit your questions throughout the presentation and then we'll go through them at the end, we'll leave plenty of time for that. So to remind everyone, TruFin is a holding company. We've got 3 businesses, Oxygen, Satago and Playstack. We're going to give plenty of detail on these businesses later on in the presentation. But for now, Oxygen is the U.K.'s #1 provider of early payment programs and other procurement software to the public sector based in Birmingham and its CEO is Vicki Sloane. Then the Satago provides invoice financing solutions and credit controls tools to SMEs in the U.K. and its CEO is Sinead McHale. And then Playstack. Playstack is an award-winning games publisher based in London, the U.S. and its CEO is Harvey Elliott. We own a majority that owns a majority stake position in each of those 3 businesses. So before we go into detail on the businesses, what I'm going to do is give you a very high-level top-down view of the group's performance in 2024. So it's obviously a beautiful graph, I'm sure you'll agree. So as you may remember from this time last year, we said that we knew 2024 would be a really good year, and we obviously didn't know quite how good it would be and it turned out to be spectacular. And a lot of the revenue was driven by Playstack, it was very much assisted by Oxygen yet again as it has done in a year after year. So what this growth has allowed us to do is to not just turn profitable, but we turn profitable a full year ahead of market expectations, as you can see here. 2024 was the inflection point for the group. We improved EBITDA by GBP 11.8 million (Sic) [11.1 million]. We went into profitability not just going into profitability convincingly. And it's a massive, massive milestone for the group. I can't tell you how important it is for us because we gave commitments to shareholders that we wouldn't need any more external capital to reach profitability. And so it's a real pleasure to be able to say we've achieved that. But this is the past. What about the future? Since 2025 has started exceptionally well. We -- the first 2 months of the year, that's January and February this year, we've grown more than 145% year-on-year. So I would -- I've got to give the caveat that this -- the Balatro and Abiotic, 2 of the big drivers of the revenue growth last year. They launched on the 20th of February and the 2nd of May. And so the comps later on this year do get harder. So don't do what my son did yesterday, which is saying, daddy, daddy, 14.8 x 6 is about GBP 90 million because that would be -- I've got to Tamper that sort of enthusiasm. But obviously, it's been a great start to the year. So we're all thrilled. And on that note, I'm going to hand over to James, who's going to just go through the 2024 numbers in a little more detail, and then we're going to go into the subsidiaries.

Thank you, James. So obviously, 2024 was a fantastic year for [indiscernible] revenues were recorded at GBP 55 million, up from GBP 18.1 million in the prior year. As James said, a huge contributor to that revenue number is Playstack, recording revenues of over GBP 44 million as compared to GBP 8 million in the prior year. Oxygen, very predictable growth, 25% in the year going from GBP 6.2 million to GBP 7.7 million, very predictable and increasingly profitable. So the only negative from a revenue perspective, the loss of its Tier 1 bank contracts in July impacting the full year revenue performance and revenues went back from GBP 3.8 million to GBP 2.5 million. The result of that revenue, GBP 55 million is a net revenue figure of just under GBP 25 million margin dropping in the year due to the sales mix, obviously, a high proportion of revenues related to games, attracting costs and royalties. But that net revenue number increased by GBP 11.5 million over the prior year. And that fed through to an increase in the adjusted EBITDA number of GBP 11.1 million. And the point being there is there hasn't been a significant increase in operational costs, staff costs to be able to support that revenue growth. The increase in the revenue -- net revenue line is pretty much fed through to the adjusted EBITDA line. Staff costs, once you strip out share-based payments increased by GBP 200,000 in the year and there was an increase in the impairment charge. Other than that it all went through to an adjusted EBITDA increase of GBP 11.1 million to GBP 7.6 million positive as compared to GBP 3.5 million last year. All metrics on the P&L profitable. Profit before tax, even allowing for the share-based payments was positive. And indeed, the tax number, we have a tax credit in the year as we're now recognizing an increased deferred tax assets relating to the anticipated performance going forward of Oxygen and Playstack. So very positive P&L. And actually, in addition to the deferred tax asset, there are GBP 70 million of tax losses within the group to utilize going forward and offset against future profits. Cash, a final point I wanted to bring out for 2024. Total cash just under GBP 15 million, GBP 14.9 million and unrestricted cash, GBP 13.6 million. So cash in a very healthy position. 2024, fantastic. What does '25 look like? Well, we've had a great start to the year. As James said, revenues are up in the first 2 months, revenues just under GBP 15 million and growth year-on-year of 145%. Playstack increased over last year very significantly. That's 196% up and Oxygen continues to be very predictable in its growth on the top line.

Great. Thanks, James. So Oxygen. So just to remind you, Oxygen provides county councils across the U.K. with early payments software and other related software products related to procurement. It's got around 60 -- just over 62 of the councils in the U.K. signed up. Average contract duration is 5 years, very, very, very high retention rates of those councils. So a phenomenal backdrop to what is a phenomenal business. So if you look at the graph, you'll see the EBITDA progression this year has been excellent, and we very much expect this to continue. I mean to James' point earlier about the GBP 70 million of tax losses, we acquired this business in 2016 when we had GBP 40 million invested into it already. At the time, it was losing GBP 750,000 a month. So you can imagine where this business has come from and where it's heading. So it's -- yes, it's been an exceptional turnaround story. And the headline, we talk about operational leverage. What do we mean by that? In simple terms, how much of every GBP 1 of revenue falls through to the bottom line. So in our case, last year, we grew revenues by GBP 1.5 million, and that resulted in a GBP 1 million increase in EBITDA. So it's roughly a 66% operating margin. So what that means in real terms is for every GBP 1 of revenue we generate, Oxygen increases its EBITDA by 66p. So the leverage we talked about is -- the result of that is the leverage comes from the fact that revenue increased by 25%, but the bottom line increased by 88%. So that's the leverage when we talk about operating leverage. So -- and it's important to say that, that operating leverage is going to increase over time. So 66% is very much not the ceiling. But operating leverage is useless without revenue growth. So that is why this graph is so important. So this shows you our visibility over the next 4 years. So if you -- and what this graph says is that we know where the next -- the 85% of the next 4 years revenue is going to come from. I mean it's going to come from existing clients we've already won. So to put that another way, if we didn't win another client ever again, 85% of our early payment revenues is already baked in from existing clients we've already won, which is obviously a phenomenal position to be in. And just a little stat on the right side, we are servicing -- as of the end of last year, we're servicing well over 24,000. So we're accelerating early payment into the bank accounts of over 24,000 small suppliers and large suppliers, but predominantly small suppliers up and down the U.K. So it's a phenomenal value-add and social good we do for this country, especially difficult times like this. So that's a stat we're really proud of. And as of February, at the end of February, that number is now 27,000. So although nothing happens fast in this space, hopefully, that demonstrates that some of the sort of little early indicators to give you a taste of the future. So it's all very well us having 85% of the future revenue spoken for. What about the 15% that we haven't yet won. So in the pipeline, we have over 100 other clients that we're speaking to, early payment clients. So we have won historically in the past about 6 councils a year, and we very much expect that trend to continue. So you can see why we're so confident around our revenues for the coming years. And then you couple that with the operating leverage, and you can see why this is such an attractive business for TruFin shareholders to own today. This graph also shows you the various new clients we won last year, some of the renewals of clients we had and some on the other side of our business, we've got Insight Solutions, which is the data side of our business, and we won many new clients on that side of business. So when we talk about 62 early payment clients, we don't talk about the data side. We've got many, many, many hundreds of more clients, but that's on the data side of the business. So just talking about Satago, I think just going to open up with -- we're going to talk about the elephant in the room, which is Lloyd's. So we're very cautious about [indiscernible] we've always been and we will continue to be very cautious what we say about Lloyd's. But there are 2 things I would personally like to say. It's been a complete -- the news last year was a complete body blow to us, not just us at TruFin, but to Sinead and her entire team. So they did a phenomenal job building a phenomenal product, and it was a complete shock to us all. The second thing I would like to say, and I won't -- please don't ask any questions around Lloyd's because we won't be answering them. The second thing I would say is that Lloyd's remain shareholder of Satago, and we have a very, very good working relationship with the equities team at Lloyds. And so we -- I think that's important to say. And again, we won't be going into any more details about it, but we do have a very good relationship, and they remain the shareholder of Satago. So what are we doing now? Well, after the news that Lloyds decided to terminate their contract, we had 2 options. One was to bury our head in the sand and cross our fingers and very much hope that another big contract will land. And the other option was to accept the new paradigm and grasp [indiscernible], and that's what Sinead has done with her team. So we're controlling what we can control and we're rebuilding. And what that really means is we're focusing on winning where we are today. So Satago has some incredible partners, and we're very lucky to work with them. So we're focusing on maximizing our relationships and the value we can generate with those partners. As you can see today, we announced -- or yesterday, we announced a 3-year contract with our largest software reseller. Satago also won a contract with Distribution Finance Capital. And yesterday, we also announced that we went live with a new embedded finance product for a Tier 1 Portuguese bank. So the Lloyd's, yes, it was extremely disappointing, but we've reset the business, not just in terms of our expectations for the business, but in terms of also the headcount, we've radically had to reshape the business in terms of costs, which we've done and we took those costs in 2024. So we came into 2025 fresh without any of those unfortunate costs that we've had to endure in 2024. And we have a very clear set of plans, which we're planning on executing this year and next. And as you can see, cash generation is very much our focus, and we expect that -- we expect to target to be cash generative by June 2026. So Playstack. So last year, we said 2024 would be the year of Playstack and it very much was. Balatro has sold over 5 million units, which is an unbelievable success. And as of today, it's well over 6 million units. I mean it's a bit like one of those annoying kids at Sports Day that wins all the metals. It scooped the Game of the Year Awards Medal, BAFTA Medals, the Indie Medals, the Golden Joystick Awards Medals. I mean it was just an extraordinary year for Balatro, and we're super proud to be involved with such an incredible developer as LocalThunk. And our team has done an incredible job to really let this game shine and to bring it to as many players as possible. And that is continuing this year and will go on for many, many years. But interestingly, though it was such success, it did take the shine of the incredible success of Abiotic Factor. So this is another indie game that we launched last year. It's another smash hit sold over 1 million units, which is an absolutely enormous number for any indie game. So it wasn't just Balatro that sold phenomenally well. We also launched and the team launched Abiotic Factor and The Rise of the Golden Idol, which is one of the part of our Case of the Golden Idol, Golden Idol sequel. And that was another hit. We paid our investment on day 1 for that. So we had 3 launches last year, all phenomenally successful. So yes, it was very much the year for Balatro. But like the headmaster at Sports, I also want to give praise throughout the group. It was a phenomenal year. And I think what is lovely is this year, in March, we also want to place that one Publisher of the Year of the U.K. Awards, which is the industry awards in the U.K. So that was lovely recognition for them and their team. So I think what gets this industry into issues and has done in the past is our post normal success, there tends to be a lack of discipline, and that's absolutely not happening here. So we are very much focused on the data. So I know I've talked about these slides -- these graphs in the past, I'll just go through them quickly again. So what these graphs show is the purple dot shows our external investments. So that's the investment we make in a game, an external investment we make in a game, which they call developer advances before we launch a game. So we make an investment and then we look to recoup that investment post launch. The green line on each of these graphs shows you the revenue that is generated from that game. We get first recoup on the games before then our investment is repaid and then the revenue after that split between us and the developer. So as you can see, when the green line crosses the purple dot, that effect means that we're making money on our investment. So you can see in the box below, we show some stats. So hit ratio, I think to clarify because there was a little bit of confusion last time. A hit ratio is not a game that is a hit. This comes from our hedge fund background. A hit ratio is how many -- if it's like a slugging ratio in American term. If you take a swing at something, have you hit it? And so in our world, if you make an investment of GBP 100, have you made GBP 100-plus made GBP 101 plus. If you have, that's considered a hit as we've hit our investment amount. And so you can see in over 90% of the games that we've launched, we've made our investment, our hit ratio is over 90% to be accurate on that, we've launched 12 games so far since inception. So that's without cherrypicking these are console games since launch, launched 12 games and 11 of them have returned their invested capital. And on a weighted average basis, which is the fairest way to calculate our return on invested capital, we have made well in excess of 300% and well in excess of 200% IRR on our games. And those are extremely conservative numbers. One interesting stat is we now know that XL breaks at 1,256% IRR. So if you try and calculate a return higher that, then XL blows up, which is causing us some problems with the games in a couple of our investments. So it's been -- it's -- so far, it's been our data-driven approach to Playstack has paid off. This year, we've got 7 more games launching, and you can see that on the right-hand side of this graph, starting with Little Problems, Darkwater, Lorn Vale. And then we get -- I didn't mention Abiotic Factor last year launched and sold a million units and still only beat it. It's going to its full launch in June this year, which is -- makes it even more of a phenomenal achievement. And then we've got Unbeatable, One Move Away and one game that's yet to be announced. So there's an extremely exciting pipeline of games coming up. I think one other thing to say, and this is not to get people too excited, but just to give people a taste of what we've achieved and maybe where the future is. So far, if you look at all the games that we've launched so far, we've spent 2.5 -- just over GBP 2.5 million in developer advances. These are the advances that I mentioned earlier, where we give external developers advances and we launched the game, return that capital and then we split the revenues in the future. So, so far, with GBP 2.5 million of developer advances, we've created a business in Play, which is over GBP 40 million of revenue and GBP 11 million of EBITDA. By the end of last year, so the start of this year, we had over -- we have over GBP 7 million of developer advances out in the world, your money, which is yet to generate a return. So those advances are for games, these 7 games that are launching this year and for games launching in '26 and '27. So I'm not saying that you should multiply that GBP 44 million can create -- is generated by GBP 2.5 million. Therefore, you should multiply that by circa 3x to get to where we're going to be, but it gives you a feel for some of the potential for this business. And the next -- by the end of this year, we are budgeting all generated from internal cash flows. We're budgeting that we will have over GBP 10 million of external development in games by the end of this year. And by the end of '26, it will be over GBP 16 million, so to James' point earlier about having a very, very healthy cash balance, everything we've done, we haven't restricted the growth of these businesses. Yes, we are focused on cash generation, but we also appreciate that the data is so good. If you trust the data, then you have to be making the sorts of investments we are in this business. And again, just to reiterate says, gosh, you're going to need a fundraise to do all that. No, this is all from internally generated cash. So I think just to summarize and to reiterate, we said it all before, we -- at a group level, we delivered on our commitments to shareholders. We didn't have an ask for more money to get to cash flow breakeven, and that's really been an important focus for James and myself. And we've got cash on our balance sheet. It's a very healthy cash balance, and that's a growing balance. And as a business, we are profitable and cash generative. Oxygen is in incredible shape. It's a business any firm would want to own with this type of profile. It's got -- Satago is taking the medicine. It's bouncing back post the big reset and it's focused on cash generation. And Playstack is remaining disciplined. We're trusting the data and we're looking forward to another exceptional year. So the company is in rude health. And before taking any questions, I do want to say thank you to all the people who helped us get to this point. So the CEOs, Vicki, Sinead and Harvey and their teams, we've got over 170 people of exceptionally talented individuals who have helped us get to this point. And you, the shareholders, who have backed us and trusted us. So thank you very much. Indeed, I hope you're happy with our progress. And with that, I'm going to ask, I think, Alex, to move over to the questions.

That's great I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q&A can be accessed via investor do. James, as you can see, we have received a number of questions throughout today's presentation. If I may now hand back to you and kindly ask you to read out the questions where appropriate to do so, and I'll pick up from you both at the end. Thank you.

Great. Thank you. So I want to lean in there. So a question from Bobby. Bobby's got a few questions. So top one, at the end of December, the cash figure was GBP 15 million. What is it now? We haven't said, Bobby, but I think we've alluded to the fact that it's a growing cash balance. So I think we should -- thanks for your question. Next, Bobby, you've got 7 games in development, which is the one that you have the highest hopes for and when is it due for [indiscernible]? If you look at -- there's very lots of public data on wish list, et cetera. So we won't say what we feel is the game that's most likely -- we think it's most likely to perform because tempting fate. But if you look at the wish list, the wish list suggests Unbeatable which launching after the summer and Darkwater launching next month, they are looking like they have got just in terms of external data, external data suggests those are the games that are most likely to deliver. Balatro. I'm going to have to lead some of Bob's question. Bobby, Balatro, is there a new... Pipeline... We'll be talking about that. We'll be talking about any new releases for Balatro, et cetera, we'll be talking about the Playstack will be talking about and making sure that we get the full marketing benefit of that. So sorry, we won't be answering that. If you've achieved GBP 15 million in the first 2 months of the year, is the full year figure of GBP 45 million realistic. It seems very low despite the comps versus '24. So I think Bobby is referencing the GBP 45 million from the analyst number. So he is forecasting us and forecasting that we made GBP 45 million of revenue this year, and we've done GBP 15 million in the first Yes. So revenue in the first 2 months. So... Yes, that's a very -- I think everyone will do the math. That does seem like a very fair -- a fair point that there's definitely scope for us doing better than that this year. So Bobby also ask says oxygen appears to have an interesting growth trajectory. What is your 5-year view in terms of sales and profit expectations? So we mentioned in the first 2 months of the year, Oxygen grew in excess of 20% and last year grew 25% top line. So I think that would be a fair -- if you sort of extrapolate that out, I think that would be a fair way to look at it. And then I talked about the operating margin and how that's rising as well. So you can then figure out what the sales and profit expectations are because obviously that's not something we publicly said -- so Jack talks about the same question about the first 2 months of the year were excellent and how does that place for the rest of the year? And then I think it goes on to ask, is there any reason to ask if Balatro, Abiotic Factor might fall very quickly. So there's no reason to expect them to fall any quicker than is normal for any game. And it's very pleasing to see actually they are outperforming the normal decay curve for games. So no direct answer to the question, there's no reason. What are your views from Bruce? What are your views on value realizations and recycling of your portfolio? So we've constantly talked about making sure that we are looking to realize value for shareholders. We -- historically, if you look back truth in history, and we had started with 6 businesses and now we've got 3 businesses. We've never bought another business. We've had some bolt-ons for the existing businesses. We never bought a separate business. So I think that give you a feel for where we expect the future to go, but it's never good to be putting time lines, et cetera, on those sorts of things, then it gives buyers -- potential buyers sort of unfair advantage. So I don't know if that helps you on that. I think Bruce I think that's where we've got to in terms of the amount we're prepared to say. And then Jack asks, he says, I was shocked, as were we Jack, shocked at the fact the price fell yesterday on the update. Lots of companies are now doing share buybacks when they have excess cash. Now cash is consistently growing quickly. Why not take advantage of such share price? Do you want to do new deals? So it's a great question. As we said -- as I said in my statement, Board has discussed at length and what to do with the excess capital we have. One shareholder during this roadshow said, don't be in any wild hurry to do anything just breathe. It's lovely that you're in a position where you actually got excess cash. But we do things -- we do move quickly as well as a team. So I appreciate that the suggestion of that. But we have -- we are all over that. We're thinking about it hard. And so thank you for pointing that something I know that many shareholders are also focused on. And do we want to do new deals? We absolutely do want to do new deals as we did by buying Bidstats for Oxygen and Magic Fuel for Playstack, et cetera. But -- so yes, we are always on the lookout for bolt-on acquisitions for the existing businesses. Hope that answers your question. I think that's the end of the question. I know a little shout out to -- I know Henry Kenner, our former CEO and Chairman is listening to this call. So Henry, I'm surprised you haven't asked a question, but hello from us. So that seems to be the end of the questions. So Alex, can I hand back over to you.

That's great. Fantastic. Thank you both for addressing all those questions from investors today. And of course, the company can review all questions submitted today, and we'll publish those responses on the Investor Meet Company platform. But James, before we direct investors to provide you with their feedback, which is particularly important to the company, could I please ask you for a few closing comments?

Yes. So I'm just going to reiterate what we said earlier. We're thrilled that we'll be able to deliver on our commitments and our promises to shareholders that we wouldn't need more capital to reach profitability. We've got a very healthy bank balance, growing bank balance, but we're profitable. We're growing fast, as you can see in the first 2 months of the year. So we are in the best position TruFin has ever been by a country mile. So again, thank you all for your support. And Bobby says thank you. So thank you, Bobby, for your questions, your multiple questions. And I just want to say thank you. Thank you, Alex, for hosting this meeting.

Our pleasure. Thank you once again for updating investors today. [Operator Instructions] On behalf of the management team of TruFin plc, we'd like to thank you for attending today's presentation, and good afternoon to you all.