Objective Corporation Limited (OCL) Earnings Call Transcript

Yes.

Yes. So while we're still with you, Steve, Stephen Mayne has posed a question -- has a couple of questions. There's one for you which is, what is Stephen Bool's attitude to the idea of having more independent directors on this Board, along with appointing our first ever female director? Is a 4-man Board really appropriate for a $1.6 billion in 2025?

My attitude is that I think we've got to have the best Board possible and it's about where we can add value back to the Board and if there are people that we can bring to bear, female or male, that can allow us to execute better, then I'm absolutely open to that. But I think the Board, as it stands, operates well, but it's certainly an ongoing discussion.

Thanks, Steve. I think just to add to Stephen Mayne, look, I fully respect the question. It is something that we do discuss. I think only recently we've become an ASX 300 company and the Board has been a concise and effective Board for some period of time. I think there's an increasing expectation of having female representation, not perhaps only by our shareholders, but also by our staff. And I think the next time we come to adding to the Board, that's something that we'll be taking due consideration of in the same way as we take the same consideration to the executive team as well, where we have a strong female representation in comparison to. The participation of females in the IT industry more broadly. So look, it's something that we do actively consider. That is something that is talked about on a fairly regular basis. And so you could expect to see that address this on future point. Okay. Stephen Mayne, I see that you have asked one of the question. Perhaps I can answer that at the end of the presentation. And I think some of that perhaps will become -- will be answered for you in the presentation. So just coming back to the re-election of Steve, if there's no other questions, some of the proxies received is displayed on the screen of -- as the Chairman, I will direct all undirected proxies in favor of this resolution. If you have not lodged a proxy and you are not voting during the meeting, please indicate your vote in the poll on the screen now. [Voting]

Okay. Okay. I need to move back to another resolution, apologies. And that is I thought I was going to dip out on quoting all the section numbers, but here we go. Please note that pursuant to Section 250R(2) of the Corporations Act requires that a resolution to adopt the Remuneration Report be put to the vote of shareholders, and shareholders have the opportunity to discuss the Remuneration Report at the Annual General Meeting. However, under Section 250R(3) of the Corporations Act, the vote on this resolution is advisory only and does not bind the directors of the company. I now move that the Remuneration Report of the company, as set out in the director's report for the financial year 30 June 2024 be adopted -- 2025 rather, be adopted. Before voting on this motion, is there any discussion? A summary of the proxies received are displayed on the screen. As Chairman, I'll vote all undirected proxies in favor of this resolution. And if you have not lodged a proxy and you were voting during the meeting, please indicate your vote in the poll on the screen now. [Voting]

Okay. That brings us to the end of today's formal meeting, and I declare the meeting closed. I'd like to now give you an update on the company and its future directions. And at the conclusion, I will open it up for further questions. So first of all, let me just address the financial highlights for 2025. We had revenue of $124 million; annualized recurring revenue, up 15% to $120 million; adjusted EBITDA of $46 million and net profit after tax is $35 million; R&D $31million, representing 30% of software revenue; operating cash flow of $46 million, cash at balance date of $99 million and total dividends received of $0.22 per share, unfranked. If we have a look at the transition to subscription revenue, I think this gives you -- I've shown this chart before in both results and also at other AGMs. Historically, I think for me and what I communicate regularly to investors is the dark blue line, which is -- this is revenue as opposed to bookings. I mean we often talk about ARR and no doubt we'll talk about that again a little bit further on in the presentation. But this gives you a sense of what the growth rate has been like. So we -- in the 2025 year, we cracked through the $100 million mark in terms of annual recurring revenue achieved. 84% of the revenue was recurring. And this was against 100% being subscription revenue as well. These 2 charts also give you the essence of that journey over time. So in the last 5 years, we've had a 17% compound annual growth rate in ARR growth. And the SaaS revenue that you can see here. First of all, probably the bottom light blue line, the USP or the historical USP, Upgrade and Support Program. Revenue is still growing albeit mildly, as you will have seen in other companies that have made sort of the cloud transition. Over time, that tails off. We would expect to see that tailing off as well in the case of Objective over time, but it's good to show that it still remains resilient as we make the conversion to SaaS. You can see here again in the last 5 years, the compound annual growth rate has been 28% growth in that SaaS, and the nonrecurring revenue, as I've outlined in other presentations, is most fortunately declining at minus 2%. So again, those of you that have been to prior AGMs or have been to any of our Investor Relations presentations at the half and full year. We'll know that this is something that we've really been driving as a business. If you look at what the profit line is like as per the strat plan, 79% adjusted EBITDA margin and 15% ARR growth, I think, by any metric. That is a very, very strong result. So if we look at the company's strategy, our mission, Outstanding GovTech driving stronger communities and nations I think if you walk around the -- any Objective office, you'll see this called out in spades if you attend -- if you were to attend any of our monthly company updates where we celebrate the achievements of the last months and particularly what we're doing for our customers. Also this year, we celebrated most recently our 25 years on the ASX. We got to ring the bell as you might have seen in other communication and there's an infographic for you. That's, I guess, the equivalent of This Is Your Life and that's all of our annual reports for the last 25 years since the top left-hand corner is our IPO document through the current document that's available online today. So quite an achievement, and I'd also like to just point out that business is a team sport and we've been very, very fortunate to have incredible team contributing to all these results over the last 25 years. Again, customer relationships, once upon a time, we had very few in the 25-year plus category. I think we're now actually approaching some of our customers are approaching the 30-year mark. I think you well appreciate that technology has moved a lot on in that period of time, and our customers continue to invest in their relationship with us as we do in our software for them. So it's been very much a symbiotic relationship with all of our customers. You would also, I guess, appreciate that the plus 10-year customers, this is only a small subset of the customer relationships we've had over this period of time. We also did have in the last couple of months, back in July -- sorry, August time frame, we had our very -- our very first -- a very most recent full Activate. This is where we get everyone together for up to a week for some of our groups, but certainly a couple of days for everyone from around the world to come together. This comes at a fair cost, I guess you would appreciate. But we found this event, which we historically did pre-COVID and we tried a few digital versions during COVID as most companies did. And then in '24, got most people back together for a little 2-day event. But this was the first year that we got everyone back together off-site to have Activate '25, which was, as you can see there, Fit for '26 was the theme of the conference. And it was really a way of getting all of our people together from all around the world and making sure that everyone was aligned in terms of where we were taking the business in '26 and beyond, and it's really been part of the objective culture for a long period of time. Equally, I think every presentation I've done at an AGM or results presentations included the flywheel of innovation. Never has this been any more prevalent than it is today. Our investment comes upfront. That leads to outstanding software. We deliver an outstanding experience for customers if they like what we do. They pay us. And thus, the flywheel of innovation can continue. I think that's very clear today, especially when we're spending and investing something like 30% of all software revenues are going back into just software alone and more revenue on top of that is going into go-to-market and other aspects of the business. You might note that we've probably changed the first box in the top left-hand corner, once upon a time, it just said, increased R&D investment, whereas today, it says, increased investment. And I guess that's taken to consideration that we are spending and investing more in our go-to-market activities around the world. Again, just referencing that 30% of software R&D. I think the great news for both our shareholders and our customers is that we've now exceeded a compound investment of over $300 million since listing publicly. $135 million, 44% of that investment has been in the last 5 years. So the rate of investment in innovation has been rapid during this period of time. And as you can see that, that's manifested itself in the software where we're delivering and also the results that we're achieving. A cornerstone of everything we've done has been the Objective Design Language. Even now our acquisitions go through a phase where they get totally reimagined under the Objective Design Language. This has been really one of the pillars of what we've done from a software perspective and a user experience perspective over the past 10 years. It has really come of age over the last 2 years. We have a design team that designs all of the UX for all of our products centrally, which means that no matter which product that you customer uses from Objective, it all has the same look, feel and end user experience. There was a question posed earlier about AI and probably this is the best place to address it. There will be more information about a new capability called Objective Intelligence available on our website soon. I think there's already some information there about it. But Objective Intelligence is something that we've been developing as a central capability for the last couple of years now. We've been a long-term user and investor in AI before sort of struck prevalence, going all the way back to intelligent character recognition and optical character recognition through to things like Trapeze, which have used computer vision really for many, many years now. And we've also used the OpenAI API for pretty much since its inception 10 years ago for things like document summarization. Obviously, everyone's got sort of hot and bothered about ChatGPT and now all the other LLMs and providers that are available today. I can't do Objective Intelligence justice on the AGM call today. But what I can show you is these are all the products that we are shipping today that incorporate an AI capability that's run by Objective Intelligence. So all the RAG-based capabilities of all the products on the left, all of the automated document intelligence capabilities of an even bigger set of products. Computer vision, as I mentioned, in Build, Trapeze, and RegWorks, and really natural language processing is coming to all of our products as well. There's another question that was raised earlier that's in the Q&A that I can see here. I'm not sure whether others can see it. How many full-time staff do we currently have? And is that likely to fall over the coming 12 months with the rapid rollout of AI? So we have approximately 450 staff today. And I would say that we are enormous adopters of AI, not only in the sets of products that we're delivering to customers, but also in our engineering teams. So we're not looking to reduce the size of our employee base. In fact, we have many positions open today, but we are getting obviously, an increasing level of efficiency, particularly in engineering, but really right across the business. We have a -- we now have a monthly AI forum where we bring the entire organization together to discuss where they're using AI, things that they're experimenting with, where we can get other improvements and other efficiencies with AI. There's a separate monthly meeting amongst all the leads of engineering to look at how we are leveraging AI in terms of advancing what we're doing from an engineering, delivering AI capabilities for customers, but also how to drive that efficiency. So no, we're not looking to actually reducing the number of people. But you could look at it through another lens and say, we may not increase the head count as fast as we might otherwise do as we get efficiencies through the deployment of AI in all facets of our business. I think that probably, Stephen, addresses your other questions as well that relate to AI. But I can assure you, we are energetically embracing AI in all parts of the business. Just coming along and talking briefly about each of our lines of business, Information Intelligence, Planning & Building and Regulatory Solutions. Let me, first of all, start off by announcing the transition of what was historically our Content Solutions business and prior to that, our Content & Process line of business. During the year, certainly, during Activate '25 and certainly rolling out now for customers, we've just completed our 7-city roadshow around the world with our Collaborate customer conference, specifically for Content Solutions, which is where we announced the change of name to Information Intelligence. And it has really come about because we have a wide range of capabilities, 3Sixty, both those products are now incorporating parts of Objective Intelligence in terms of capability, plus Connect, plus [ Forex ]. We've already bought those things together in a seamless way, to deliver the Information Intelligence platform. So this is quite a shift for us. You'd say it's almost as if the last 25 years has been really establishing the building blocks for leveraging all of the information that our customers are generating that can support really high-quality AI outcomes. And so again, there are some videos that were taken at our events in the last couple of weeks that we'll make available on our website over the next month, and that will give you further insight into how some of our customers are incorporating the new AI capabilities in terms of what they're delivering with the Objective Information Intelligence platform. If we look at the overall performance, I think this information has been shared with you before at the full year. The annual recurring revenue bookings were up 12% for the year, which was -- we thought was particularly strong. The highlight being the Scottish government that is moving 18,500 users from its on-prem ECM solution to Objective Nexus Cloud. So that was certainly one of our Tier 1 customers embracing the future of Nexus Cloud. Again, I won't read through all of these for you. Just call out 3Sixty, you got -- was deeply integrated with Objective Intelligence for using Microsoft Copilot for data. Objective Connect brought new customers onto the platform and Keystone added to its portfolio of Australian superannuation funds. So overall, the revenue was up only 4%. But again, I think we've explained this by really trying to reduce the services line for the company, which we've done I think, a very good job of with the team to make sure that onboarding new customers is becoming increasingly efficient and financially effective for customers. If we look at the market drivers here, on the left-hand side, this is the new infographic that we've introduced for each of our lines of business. On the left-hand side, what's really happening on the regulatory side and governance side. So compliance complexity, information and process management, which has been at the core of what we're doing, even though we've had a rebranding to Information Intelligence. That doesn't mean that we've left anything behind from what we've done historically, customers still expect us to provide great information governance and process management solutions, secure collaboration and that strong privacy and protection that we have provided over a long period of time. On the digital transformation side, faster responses, AI automation, which we can discuss ad nauseam, the ability to scale resources. And also what government expects from AI, which is perhaps something that's a little bit different than what other nongovernment customers are looking for from AI. I'm sure you've seen plenty of information in the press about sovereign AI and private AI. These are all things that are somewhat different for us than what they would be for people that have got general AI propositions. I touched on this before. Nexus -- moving Nexus in the Scottish government, 5,000 citizens, served 8,500 users. And then moving along to planning and building. Again, this was a strong highlights for the year. Our ARR was up 31% on the prior year, a 6% sales revenue change. And again, quite a material drop in the services revenue. We're onboarding a lot of new customers onto the build platform at our cost, but you'll see that this ARR bookings come through in the -- obviously, in the sales revenue for the '26 year. So Objective Build was launched in Australia earlier this year as a soft launch at the PIA conference in Darwin. Again, we're still very much on track for delivering that solution into the domestic marketplace at the end of March 2026. And we've got in excess of 10 foundation councils on the Eastern Seaboard now. In New Zealand, we continue to focus on developing out what we consider to be the national platform. We're out to over 40 councils now signed up. And you can see there 29 councils already live on build. We expect probably at the end of the current half to be well north of 40 that have signed up for that platform as well. That's more than 50% of that market by a number of councils. And then finally, Trapeze now used by 280 local government customers across Australia and Australia and New Zealand. We also had 50 expansion opportunities during the year as well. So all in all, planning and building had a stellar year in 2025. Again, if we look at the market drivers, mounting pressure caused by DA approvals, on the regulatory side, rapid regulatory changes. So we are taking care of all of the changes that come through on the regulatory side, particularly now I'm talking about New Zealand with a large number of councils that are live, as the regulatory changes come through, we changed the software to do the changes effectively for customers. There is an industry shortage of planning professionals and there's often complex approval pathways. So nothing in the regulatory space. It seems to be -- seems to ever be particularly straightforward. And that's just really what the government expects or what citizens expect of the government. On the digital transformation side, a huge part of what Build does is provide transparency. It also provides a lot of additional now intelligent lodgement, vetting and compliance, checklists. Clearly, that comes about through the use of great AI tools. And it really is this specialized industry-wide platform that's driving the value for us. So we think that Build drives enormous value for customers. Again, if you go and talk to any of our customers, you'll see the proof points not only in terms of the transparency, but just the throughput and the fact that we provide all the regulatory updates for customers as being things that are particularly valued. One of the other things during the year was IoR. Again, this was a look, a relatively small new member of the family and already I'd probably say that it's shaping up as probably one of the best acquisitions that we have made. I think it looks for me a lot very strong with Trapeze, along with Trapeze although the transition to Objective Trapeze took a couple of years, the transition to Objective Isoplan is going to be done much faster. It's quite a strategic piece. It fits very broadly into our planning and building end-to-end process. And again, if you go to our website, you'll see great infographics and videos there of just how it fits into that end-to-end piece. So the combination of Isoplan with Build, with Trapeze, we think is an outstanding proposition for both councils in Australia as well as New Zealand. And then moving on to Regulatory Solutions. Sales revenue was up 6% for the year. ARR was up 17%, which again was probably slightly under our expectations, but still a very strong result and that will flow through into the '26 sales and profitability numbers. The highlight for the year was really being selected by West Australia's LGIRS organization, which is the largest regulator in the state for its new compliance and regulatory system. In New Zealand, MPI went live with the Fisheries Observer solution. I believe that there's a video case study that's on our website, if you want to hear more about that. And the New Zealand Firearms Registry, which I think was an ongoing success widely. There was wide concern at the time in New Zealand about this policy and regulation, but I was in New Zealand a couple of weeks ago and met with the New Zealand Firearms team. And I think it's been, again, both a tough project, one that's been very well received, broadly in the community and certainly, the performance of RegWorks for that solution has been outstanding. So we're growing a lot of capacity, both domestically and internationally in terms of go-to-market. We delivered a lot of R&D. There's a lot more to come, both now and in the -- there's both some release before Christmas and another after Christmas in terms of RegWorks and really, the product is really being extraordinarily well received by customers. At the same time, there's a lot going into marketing. We've been the headline sponsor of both the NRCoP, the regulatory body for practitioners here in Australia as well as the IoR Conference in the U.K. So I think our brand has become very synonymous with the regulators in Australia and New Zealand and the U.K. And then finally, New South Wales Transport Safety. We delivered a lot of enhancements to that system during the year which I'm sure some of you have done some field testing for us with seatbelt cameras and mobile phone cameras, so thanks for that. Again, if we look at the regulatory solutions market drivers, again, it's whole purpose for existence, increasing levels of regulation that we all know, regulations growth industry, accountable for protecting the community. And I guess, that constant mantra of doing more with less. And on the digital transformation side, it's really a great opportunity for efficiency. A lot of new regulators that get stood up, certainly come and look to us for guidance. I think that's been an area where we're specialized. And just most recently, we've gone live at the U.K. Gambling Commission. So again, our first go live in the U.K. and the first of many, I'm sure. So again, a good outlook for the Reg Solutions team. I think I've covered most of these. I should also mention the Modern Regulator. If you haven't been to the Modern Regulator, it is really a new portal for all things regulators that we establish during the year. It's actually running out of Canada, but it is a -- I guess, an industry -- an independent industry voice that we've put together to celebrate successes for regulators. And so if you haven't been there, I'd encourage you to go and have a look at what we're reporting there. And then finally, we've become known for our regulatory technology survey. We've got another one coming out shortly as well, which would take probably a little bit of different -- a little bit of a different slant this year that's been, again, a hallmark of the Australia, New Zealand and the U.K. markets in terms of the ease of regulatory technology to support regulators. Just some of the customers that we have, I think you've probably seen many of these before versus the frequent flyers here at the AGM or results announcement days and yes, if I can just sort of round out and talk about the strategic priorities. So first of all, the good thing is our strat plan process that we outlined last year is working really well. You can see here, essentially, every business plan and objective gets driven from this overall framework, which sets out, I'm not going to read it for you. This will be available on the ASX. But you can see here what drives our mission, our ambition and drives our energy is the 5 pillars, investing in people, building outstanding products, achieving the go-to-market plans, delighting our customers and being ready to scale. And it doesn't matter which line of business or which supporting central business service that we have internal at the organization, they all line up against this strategic plan. I think that's showing through in terms of the results. We've shown this graphic before. This is our path to our target. You can see here the targets that we have for the year. Historically, these have been internal targets but somehow that looked out into the wild. So we want to kind of be true to where we see the growth coming from. You can see in the boxes there, these were the numbers that we achieved in the FY '25 year, the numbers on the top being the range numbers for the '26 year across positive, I should say, Information Intelligence, Planning & Building and Reg Solutions delivering us our '26 target. So final slide, the outlook. We've mentioned the internal gross hire previously at 15% of ARR growth. Scaling profitably has been a big thing for us. I think, historically, you know that we try to get the balance right between achieving the ARR growth target and making sure that we're also getting the balance right between increasing profitability and investing. That's something that goes right to our DNA. Our R&D investments are going to continue to expand. We've probably -- I've mentioned this before at 30%. We're probably at the upper limits of what we're likely to see. But equally, I would not think that, that's going to be falling back markedly anytime soon. I think we're still powering on, I think, in each of our lines of business, whether it be Information Intelligence, Planning & Building or Regulatory Solutions, they each have an extremely bright future, and we've got to lean into investment in that bright future. At the same time, we are actively pursuing acquisitions as well. M&A has been a part of our heritage. But as you can see by the things that we have acquired historically, they all are on mission. They all are part of the strategic mission of each line of business. We don't get outside of our swim lanes, and we're certainly interested in roll-ups. We are very active today looking at opportunities. And again, we can't announce things before they occur, of course. I think Isoplan what we're already doing with our Isoplan business, the metrics that you would apply to that acquisition means that it's been -- going to be a great outcome for shareholders, if not already. And so with that, I'll open up to questions. So if there's any questions, I'll be glad to take them now. Ben, do we have any questions?

We do not, Tony. Not those that you already addressed.

Okay. Once again, thank you very much for attending the AGM today. We hope that's given you a little bit of insight and look forward to talking to you again at the first half results announcement in February. Other than that, have a great festive season. Thank you.