Kinatico Ltd (KYP) Earnings Call Transcript

Hello. Good morning, all. We have just ticked over to our scheduled start time, so we'll begin. My name is Craig Sharp. I'm the Company Secretary and General Counsel here at Kinatico. Please note that this webinar is being recorded. A copy will be published on our website following the presentation. Given the number of attendees we have here today, your microphone has been muted. But if you have any questions during the webinar, please use the Q&A function that's available at the bottom of your screen through Zoom. The presenters will attempt to answer your questions during the presentation or, if time permits, we will do so at the end of the presentation. Can we move on to the next slide, please, Tom? As always, Kinatico acknowledges the traditional owners of the many, many lands on which we meet today. Personally, I come to you from the beautiful lands of the Whadjuk Noongar people. I pay my respects to their elders, both past and present. Equally as importantly, please also note that whilst statements of past performance in the annual report have been audited, any forward-looking statements in this presentation are premised on assumptions. We always believe our assumptions are reasonable, but not all assumptions will be stated at length for you today. If you're an investor, you must always take and seek your own independent advice on investment decisions. Next slide, please. I will shortly be handing over to Michael Ivanchenko, our CEO, to begin the presentation. After he has introduced matters and spoken to you at about a high level, he'll hand over to Odelia Sarre, our Chief Operating Officer, who will talk about AI in Kinatico. She, in turn, will hand over to Chantal Walker, our Chief Experience Officer; and Geoff Hoffmann, our Chief Revenue Officer, who will talk about digital sales and enterprise sales respectively, before we hand back to Michael to wrap up. So now over to you, Michael.

Thanks, Craig. Good morning, all. Before we get into some of the results and some of the details, it's worth setting a context, and I encourage everybody on the call post to have a look in detail on all the milestones on this map from the downloaded versions. But the ones that I want to highlight, the ones that indicate our trajectory is that in 2017, we achieved our first $10 million worth of revenue after 13 years. In 2022, we achieved a second $10 million worth of revenue after 5 years. In 2025, our third $10 million worth of revenue was achieved after 3 years. That is a trajectory or the acceleration that we intend and think we can continue. Next slide, please. So straight into the results. This year, we have achieved a net profit after tax of $2 million, up 78.5%. Most significantly, that has also equated to an NPAT per employee increase of 105%. This is yet another metric of which there will be many in this presentation today, indicating the ongoing increase in underlying foundational performance in the organization as we continue to grow and accelerate top line revenue. You can see the foundation has been set to ensure that, that is highly accretive revenue. EBITDA increased to $5.6 million or up 28.2%. Total revenue up $35.2 million, up 9.4%. Correlate that to the fact that revenue up 9.4%, while profit up 78%. SaaS now 58.4% of revenue, up almost 12%. And then again, a significant point of cash, up $1.6 million to $11.8 million, or up 16%. So the -- it has been a major period of activity for the entire organization. And another one, and Odelia will go into this in further detail, but we've actually increased staff engagement 18 points to 74. In a period of global disruption and expectation from labor forces, from AI and general disruption, we've really seen that our staff have not been disrupted by the fear of AI. In fact, they've embraced it. And I would go so far as to say they're driving it internally. So we see, and Geoff will come on further in the presentation about the performance of Kinatico Compliance in market, including our enterprise win. We've got a 2-door go-to-market strategy that is working and that 2-door strategy revolves around one platform being able to simultaneously serve the small, medium enterprise market via digital self-service and the enterprise side of the market with direct sales and how that has materially increased our addressable market. We've got -- we've seen a successful transformation to AI as an organization. We are not an organization that uses AI. AI is our operating system in the way we function, and Odelia will go through some of those examples further in the presentation. And on top of that, with the engagement we have with our customers and our prospects, we have established a very strong road map of upcoming features and enhancements that we continue to take advantage of into the market and continue to be able to invest ourselves in building them. We have funded this growth ourselves and, at the same time, increased our cash balance, and we intend to continue to do that. Next slide, please. So why do we believe? We've got a regulatory market and tailwinds, which Geoff and Chantal will expand on further in the presentation, that is increasing our TAM. The quote there we've got from one of our ongoing bits of customer research, and this is very representative of a lot of feedback we get, the intelligence behind our platform is what is attracting people. It is acting on their behalf to take mental, operational and just time load off their hands, freeing them to do their jobs. Our financial results speak for themselves. We're on a march towards achieving the Rule of 40, and that is accelerating, and we will continue to pursue that. And then on top of that, as mentioned, our AI as an operating system is already showing the benefits as say that Odelia will come on to. But we're at the beginning of that journey, and we're very excited about what it actually unlocks for us in both operational efficiencies, but also acceleration and enhancement of customer-facing features. So in short, we have the knowledge, we have the product. We've shown we can execute with increasing profit year and year after year. And at the same time, the market is expanding. But with that, I'm going to throw to Jason Margach to actually go through the numbers in detail.

Many thanks, Michael. Turning to the numbers behind that proof of point that Michael has just taken us through. A broad highlight for FY '26, revenue has grown 9.4% to $35.2 million. At the same time, EBITDA grew 28.2% to $5.6 million, with the net profit after tax growing 78.5%, taking us up to $2 million. That is an NPAT growth of roughly 8x faster than our revenue. That is operational leverage, and it is visible in our EBITDA margin trend on this slide, which in FY '22 was 4.2% and has grown now to 15.9% in FY '26. I want to be clear about what's driving that. This is not a one-off cost reduction. It's not a single good period. It's a result of intentional, deliberate architectural design and structural decisions that we have made that allowed us to build and deploy AI agents across the business and that are beginning to deliver early benefits that we see as a wider organization. This will be covered off in greater detail a little later by Odelia Sarre. Thank you. Next slide, please. The revenue mix has flipped. This is an engine behind that leverage that I outlined. Our SaaS revenue reached $20.5 million in the year, which represents 58.4% of our group revenue. This is up 37.5% on FY '25, which was $14.9 million. Transactional revenue aligned with our expectations at just under $15 million for the year. Key to highlight though, on a quarter 4 FY '26 annualized basis, our SaaS revenue is now $22.6 million. Given that perspective, that annualized revenue on a prior corresponding period was $17.5 million. This is the first year that SaaS has crossed that 50% line, a 5-year trend that shows not a one-off shift. SaaS revenue has grown from 9.2% of our revenue in FY '22 to 58.4% as we speak today. 53% CAGR is what we produced for the year. This is structural. It's not cyclical. Next slide, please, Tom. Growth that we funded ourselves. Cash flow was $2.5 million in FY '26, which is up 84.9% on FY '25's $1.4 million. Free cash flow conversion of EBITDA was 44.8%. This is up 31.1%, a full turnaround from a negative 39.4% in FY '24. The cash that we generated was $1.6 million over the year, taking our cash and cash equivalents to $11.8 million. This is our fourth consecutive year of rising profit. No capital raise, no dilution and we have no debt. We are funding our own growth, which is exactly why we keep investing in architectural and AI agents that I just referenced. And with that, I'd like to hand over to Odelia Sarre, our Chief Operating and AI Officer, to take you through what that architectural has actually delivered. Thanks. Odelia, over to you.

Thanks, Jason. Good morning, everyone. With the event of AI, businesses in the tech sector have been asking themselves, do you own the data or do you just move it? Businesses that merely pass data along are exposed and much of the sector sits here uncomfortably. But this is the difference. Kinatico has 22 years of proprietary compliance data. Our Follow Me Compliance is built on our technology. We originate the verification, the result and the ongoing monitoring. We are not a reseller of someone else's data. We own the data layer. And when it comes to AI, we are an AI organization, not just an organization that uses AI. And when it comes to the use of AI, our governance is already built in, not bolted on. With 22 years of experience in RegTech, we are already trusted by over 8,000 customers to hold the information of their workforces. This naturally extends to how we use AI responsibly. It's the same governance rigor, the same operational principles and the same audit-ready culture. We are not a business at risk of being disrupted by AI. We are one of the disruptors. Next slide, please. So our AI strategy is operationalized, running on 2 tracks. Track 1 is on the left. It's today's business made better. Inwards, we have leaner operations and increased efficiency. An example of this is our 24/7 Virtual Verification Officer. We call her Vera. In the first 30 days, Vera has provided us with an annualized savings of close to $300,000, while also achieving 100% audited accuracy. But even better than that, we are now able to provide customers with instant results 24/7. There is further scope for how Vera will be deployed, but she has absolutely hit the ground running. On the right, we've got Track 2, and that's tomorrow's business made possible. This is our growth track. Outwards, we can produce smarter products. With our product and engineering teams using an AI software development life cycle, we are seeing 50% faster feature delivery and development. This means we are shipping more to customers with less rework along the way. It's the same architecture that drives our inward efficiency that is also what makes our products smarter for customers. This compounds through a virtuous cycle of growth. The same architecture driving inward efficiency and again, allowing us to produce smarter products. Next slide, please. So this is what our smarter products look like. This is just some of our AI in production. On the first slide, we have Chatref. This is our reimagined reference screening process. Dull, uninspired web forms have been replaced with an interactive AI assistant, not only walking the referee through an engaging experience, the resulting reference captured is insightful while also being efficient. Then we have IRIS. This is our intelligent reader input system. The use cases for this are exponential, providing the ability to read any identity or credential document in just a moment. It relieves admins of hours of manual onboarding and life cycle worker compliance activity, completing in just minutes. And then Agent Vera, which you've just heard about, which is our 24/7 virtual verification officer, who is now servicing our customers 24/7 and providing them with important results instantly. And we have many more agents in development across the business. But of course, none of this is possible without our people. In an AI-native company, domain credibility isn't just important, it's existential. We've built our credibility over 22 years. Our customers trust us to provide them with the accuracy that enables them to power their own operations through a compliant workforce. Our people aren't adapting to AI. They are the ones driving it. For us, human in the loop is not just a policy. It's actually where our domain expertise shines. Every AI process is designed with considered confidence and governance. Every AI output comes with a recommendation, a confidence score, an audit trail and the ability to reconstruct any automated decision. Lastly, there's always an accountable person. Our people are able to use their expertise for higher-value activities and have now added to their remit agent supervisor. And all the while we have been doing this, there are global claims that AI is disengaging workforces everywhere. That is not our experience. Our team engagement is soaring, up 18 points in the last 12 months and now sitting 3 points above global benchmarks. Our workforce is backing Kinatico's strategy, and they're enjoying it. Over to Chantal, our Chief Experience Officer, who's going to take you through our go-to-market.

Thanks, Odelia, and welcome, everybody. Good morning. So most SaaS companies have a dual sales strategy. And so while this approach itself is not new, it's the fact that we are running both of the same platform with the same compliance engine and this is what most companies can't do. Normally, enterprise-grade software is too complex for SMEs to self-serve. And on the other end, self-serve products are usually too shallow for the enterprise buyer. Kinatico Compliance is proving that we are product market fit at both ends simultaneously without splitting the product. That's what derisks our dual go-to-market strategy. We're not diluting the focus by chasing 2 markets. We are actually gaining operational leverage, which Jason talked about a lot and Odelia from one solution. Follow Me Compliance is an example of this. It's credible. It's not just a feature. It allows organizations to feel in control and stay on top of a dynamic workforce of compliance changes across the entire employee life cycle as the employees move roles or move locations. And this portability, we see as well as a retention moat because all of your workers' compliance records now live within Kinatico Compliance and it's much easier to stay than to leave. Next slide, please, Tom. Since the launch of KC, as we call it, or Kinatico Compliance, as you can see on this slide, we have signed up 75 digital organizations through the self-serve channel. And these have come from a multitude of industries, as you can see on the left-hand side and organization size on the right. And this horizontal spread derisks our traditional customer industry concentration. If you have a look, you'll see there's 19% of who have signed up who have more than 200 employees. So what we've proven out is that this self-serve approach actually works across the whole size spectrum of organizations, not just at the SME end. And we've embedded self-serve as a stand-alone acquisition channel in its own right. In addition to this market data, we continue to test and refine our go-to-market KC feature set through both quantitative and qualitative research. And we've added some quotes at the end from the research, and you saw one earlier on from Michael on his slide. So organizations regardless of size or industry, they have an increasing need to feel in control and stay on top of the very complex people compliance. It gets more and more complex every day as organizations become multilayered and the nature of workforce is changing. In addition to this, it's becoming more complex due to regulatory requirements, which Geoff will take you through in a bit. Features like Follow Me Compliance, being audit ready at the drop of a visit or having universal visibility of your extended workforce, which includes contractors in many instances, with actioning mechanics that close that loop is what makes KC unique. Next slide, please, Tom. So before we had Kinatico Compliance, the addressable market for Kinatico was structurally capped because we concentrated our sales efforts on the enterprise market. So Kinatico hasn't just added a product with Kinatico Compliance, it has unlocked a market that was previously unaddressable given the old cost-to-serve model. The digital self-service model has proven to be an economically viable way to reach these small to medium organizations profitably. And as you can see, there's about 0.5 million of there, which is available in our SAM. This has given Kinatico a credible way to get a share of the $1.2 billion RegTech market that we couldn't previously touch. And with that, I'll hand over to Geoff to talk about our enterprise customers.

Thank you, Chantal. Good morning, everybody. Let me bring this to life with a real example. So what I want to start with today is a win that best captures where our enterprise strategy is heading at Kinatico. And that is the customer you see on our screen here, which is Civeo. So Civeo, they are a workforce accommodation business here in Australia. They're listed on the New York Stock Exchange. In Australia alone, they manage around 10,000 rooms across 12 villages, plus 16,500 rooms in client-owned sites, so -- with about 2,500 staff and a larger contractor base that sits on top of that. Civeo is part of a much larger global group operating across Australia, Canada and the U.S. And to be clear, what we have signed at this point in time is the Australian business. When you're running sites at the scale as Civeo are, not knowing in real time whether people on site are compliant is not a paperwork problem. It becomes a safety and a legal exposure problem. Now that's the words that you'll see on the slide that have come from Civeo's National P&C Manager, Ali Barfoot. Quote, "Their business can't afford to wait and knowing instantly who's compliant isn't a nice to have, it's essential." So KC now solves that specific problem for them, which is a good win for them and a good win for us. And we're seeing the same shape of problem everywhere we look, whether that's across aged care, child care, health care, not-for-profit, multi-stakeholder RFP-led organizations. And after winning Civeo, we're sitting on a solid qualified pipeline of $12 million plus, and we like the trajectory that we're currently on. Businesses want a way to see and manage risk across their whole workforce, not just at a point in time. And as you can also see on the slide, that's why we're also building out a formal partner program in FY '27. With AWS already being a partnership that we've got underway, this will give us more reach to businesses without stretching direct sales. Next slide, please. This was touched on earlier by Chantal and also Michael. The rules are getting harder. Civeo's problem that they've got is not unique. It's happening to every business in every sector we sell into, small or large, every sector across the board. Right now, a business in aged care, child care, health care, mining, not-for-profit, you pick any of them, is being told by a regulator, you now have to know more about your people faster. That leaves no room for error. And as you can see on this slide, these policies and procedures and regulations are a small sample size of what they need to manage to on a day-by-day basis. If we actually put all the policies and the procedures and the processes, et cetera, in 10-point format on this slide, it would fill up plus some. So that's the complexity of the world that these organizations and businesses are working in. None of it's optional, none of it's going away, and it's only compounding for every organization and every business in the marketplace. They have more contractors. They've got more subcontractors. They're multilayered organizations. They've got more casual workers, which means more people to track, not less. So the pressure that Civeo felt isn't a one-off. It's the same pressure building across every customer conversation that's happening in market, and we're having right now today. That's why we're not betting on one new regulation or one new law or one industry. Every time the bar goes up anywhere, it makes the case for Kinatico Compliance as being stronger. And Michael, I'll pass back to you. Michael, you're on mute.