PaySauce Results Presentation - Year Ended 31 March 2024

recorded we have the usual disclaimers um so one of the key things there is that um please remember that this does not constitute Legal Financial tax or other advice we have downloaded the annual report and the the presentation deck um uploaded it rather to the nzx and it is available for download on the website so you can read this slide in full um but we're get to kick into it so we'll start off um introduce you to a man that needs no introduction the old man of P myself asan VNA our CEO and co-founder today we're going to talk through um a bit about the strategy that we've delivered on what we've done so far and we'll also talk a little bit about the strategy going forward from here we'll then H move into the financial results I'll talk a little bit about that uh so my name is Jamie Monahan I'm the CFO here um and we'll talk about the numbers then we'll move into a Q&A session at the end we have left some time for questions if you do have questions do encourage you to please um put them in the chat as we go through so we don't have a flurry at the end but of course if you do have questions that arise during the presentation please do add them into the chat and um Todd will will help us to to curate and answer those for you any questions that we don't um get time to answer or we're not able to answer in the room we will endeavor to come back to you with answers to those questions so please do send them through this is also not a onetime opportunity we love talking to our investors so um if you want to follow up chat or conversation please reach out to investor pacu.com and let us know awesome we'll get into it thanks Jamie um welcome everybody uh to our briefing today it's um it is indeed a happy moment for us uh we're reporting our first men and net profit um we've had awarded year um in Fairly challenging uh economic environment that we operate in and like to say that the impa number was 1.23 Million Jim you'll go into some of these numbers in detail uh we managed to continue growing our ARR by 19% uh we're well in the rule of 40 um and we've generated um just under $300,000 of free cash flow so it's um it's it's been it's been a good year uh but it's it's one of continuing to build on the platform that we've given ourselves um so I'll just take a minute sort of explain what's going on so over the last from the time we started to now over the last nine years um we we've built a payroll engine which is the existing payroll engine that supports U 5,900 customers in New Zealand and 1,400 customers in Australia and the Pacific Islands that's the smooth pay business that we acquired um and so it's two different platforms that we have um and the opportunity that we have now and that we're working on is moving all our technology into a new pedol engine that allows us to unify um to a single solution and support our International customers our domestic customers and then look at the opportunity that also gives us in terms of the wholesale opportunity um which is the invented payel opportunity and the micro business app so it this is a a really really important thing um it's one of the things that as Jamie said being being one of the old men of per um one of the things that that um I've seen happen uh historically is that payroll businesses keep adding and and piling on onto the existing technology and in in 20 years you're still hamstrung by some of those early technology decisions that you made 15 years ago you're limited by that um and that's a trap that that we are not going to fall into and we will avoid um and what we're doing now the new generation proll engine will use today's technology it'll have it'll give us a whole bunch of options that we didn't have when we started 9 years ago things are changing all the time time and this gives us an opportunity to build using the the latest technology and and that gives us the opportunity for both the wholesale and the micro app so that's the the that's what the gentle payroll is about um it's really one of the key things that that we keep reminding ourselves is what's the problem we are solving for our customers um and the and the key thing is being in business is hard um and and what can we do to assist our customers to be compliant and if you look at the thing that we're selling it's peace of mind and time that's the key thing that that we're doing we're looking to make the life of our customers Easier by taking care of that and and that's what the new um that's always been our theme and and using the new Gen 2 payroll payroll engine gives us the opportunity of not only the micro business app which is for end users um it also gives us the opportunity for providing the solution to other players in the market to use our payroll calculator and so we talking about things like H Solutions um there's a there's a whole flurry of people related technology out there that does not have payroll and and it the opportunity for us is how do we provide provide that pay solution to some of these businesses out there that already have got a footprint in the market that have got technologies that are assisting businesses with their employees but not doing pay off that's that's the wholesale opportunity that that we're chasing um the micro business Market continues to have the same kind of profile that that we've always look for um it is a significantly underserved Market in in our view uh and talking to our customers we know that um it is a really hard Market to get into because you need scale um and then that's that's what we're Contin to build on we've got to a point where we are now processing over two billion dollar of pedol that's a billion of the b um every every 12 months that's the that's the quantum that we've got to and that's through US providing the solution to 75,000 employees out there while our two products um smooth pay and and payce so the that's the that's the sort of quick background on on what Gen 2 pedal engine is and and what we're doing so if you look at our plan going forward is staying to the same themes that got us here um you know we we we've we've done really well to get us to this point to give ourselves a platform and and the strategy for the coming number of years is about unifying the technology to one solution so we are not supporting a myriad of different solutions out there one one solution which is the which is the gentle engine um and and that there are three pillars that you're looking at so if you look at the first thing is our customers so that is delighting them with the features that they looking for how do we make their life easier simple quick um second how do we provide our customers and their employees with knowledge around things around employment so as I said it's about peace of mind and employment and employment law is a tricky area what can we do to help our employers be a better employer to be a better boss is something that we take very seriously it is how can we up upscale our customers as employers um and the third is around the product itself how can we make that self um it customers can selfs serve it is easy it is intuitive and it is simple and that is an ongoing task that we've set ourselves is to how do we get to a point where our customers do not have to think about what they're doing it is intuitive it is easy to follow and um the second is we've been really really clear that one of our objectives on a financial point now that we've got to um cash flow profit cash flow and profitability is 10 million AR we we've got to eight how do we get the next two um around that we're working on improving our brand uh those of you in Oakland may have seen the the PES off brand start pop up we will continue to in invest in in that uh out of home marketing um we're looking to deliver a new interface um again you know put our head up and say over seven years things have aged and how do we improve that how we provide an easier simpler solution um and the third for in terms of growth we're looking at how can we make use of the opportunity we have around the wholesale product it is about refining um that the strategy it is about identifying who the potential customers are where are they What markets are they in um in order to do that we need to be scalable and and which is why the investment we've been making over the last 12 to 18 months around the gendu payroll engine is critical we move to AWS um we're moving to a single payroll engine that means that we are not continuing to add techn te date onto the product we're facing those early we're investing and making our solution our powerful solution and so we're looking at um how do we use like everyone's talking about AI um we are quite aware that it is it is a an opportunity for us how do we use Technologies like that in making our the job for the customers easier simpler and more intuitive how do we imp B things like that um and and about the last piece is about security um we are you know every time you look at the news there is a another incident um it is about how do we make our solution secure for our customers how do we protect the information that we hold how do we protect the the the trust that our customers place on us to deliver that um and and that is about making sure that we do everything possible around security of of data and and the money that we handle um so just a recap the the go forward strategy is around product and and I've covered that um it's around people and and we've made a significant number of hires over the last six months um we we've got pretty much the team that that we now need to go forward and deliver on the strategy and the third piece is is around Partnerships Partnerships with other players in the market Partnerships with accounting firms and and people who can give us scale and reach the kind of customers that we want so that is essentially the the plan for us they there's a lot of work we're excited uh we're making some really good progress um I'm delighted to see that our NPS number continue to strengthen um these are these are really really important pieces as we scale the business going forward um so that very very quickly is is the plan obviously any questions we have to take and I'll hand over to Jamie in terms of talking about the results for the last two months thank you Santa um obviously we're we're very excited to be announcing our made in profit after tax um just to be crystal clear on that it is an after tax profit before the Deferred tax adjustment so I just talked that a little bit um in the interest of transparency to makeing sure that we're not trying to trying to make things look better than they are the underlying H profit after tax was not2 Million we have released um recognized a deferred tax asset now that we are um profitable we've had about $8 and A5 million dollar worth of losses carried forward and we expect to get the tax benefit of that going forward so we've chosen to take about um a million dollars of the Deferred tax asset available in relation to um the assets that that that you know the tax benefit that we think that we can take over the next three years there remains about another $1 A5 million dollar worth of of tax benefit there um but we're not ready to take that yet so we'll review that um as we assess the profitability going forward um but there remains about um $4.8 million of tax losses available to offset the tax um charge going forward after that current deferred tax asset um enough about tax though um the underlying performance is a very very strong result and we're very very proud of it we're very excited to be here we've got an underlying um earnings before tax um number of just over a million dollars and that same equivalent number last year was um just short of of break even at $80,000 of a loss um it's a very strong result for us a significant turnaround um our profit links very closely to our cash so you can see as well our free cash flow there has increased nearly a million dollars as well turning around our um the outflow of 640,000 last year to be positive of 300,000 this year um so looking then at the the key numbers within there our recurring revenue is a key SAS metric that we measure it's very important as our Top Line indicator uh of our Revenue going forward uh so 32% increase I'll talk a little bit more in a second on that one we've also increased our gross margins uh the gross margin result there is is is a an impact of two things really one is the benefit that we're getting through the interest income and again I'll talk about that shortly but it's also a significant um reflection on the improvements and the efficiencies that we put into our support team and some of those Investments that asantha spoke about in terms of scalability and operational efficiencies and the investment into our T stack some of those results are starting to be seen in that gross margin Improvement there going a bit deeper into the um the revenue then uh the interest income is a significant component of the the increase over last year uh so about half of the interest over of the increase rather over last year is in relation to the interest income increase uh and the other half is in relation to processing fees so the interest income for us is a is a real natural Hedge for us um the benefit to us is obviously the increased funds that we get from our customers we earn the interest from that and it Hedges against the the the challenges that our customers face with those in increased in increased interest costs for them makes those decisions about signing up to new software like payroll um just a little bit harder um so we get that natural hedge in terms of that economic cycle when interest rates rise and um you know we get that benefit coming through to us on the float obviously uh moving on um looking at the overall result summary the um these two graphs really tell the story really well for me um the revenue this year has surpassed the expenses which is obviously something that we've been striving for and signaled for a long time now uh and that direct correlation with the free cash flows is really important as well the extra cash available in the business the main expense that we have is in people so we're able to to determine where we allocate those dollars um you know in terms of our invest that we make and we're able to keep a tight control on that um so we can um you know pull and push on that as as is required um we'll look at the profitability metric um through the the rule of 40 so the rule of 40 as AA alluded to before we are achieving that rule of 40 for those of you not familiar the rule of 40 is a SAS metric that combines and the overall growth rate in revenue or in profit rather sorry the grow rate year on year with the profit percentage that we're making and we use the ebit percentage we've seen investor sentiment change a little bit in recent years more towards profitability so that kind of availability of capital from the markets with um you know investors going for profit at all sorry growth at all costs um has changed and has significantly swung towards the profitability metric so we're quite pleased to be reporting the profit in that space and and we see ourselves um you know I think in shelle's letter in the annual report we've got the our destiny is in our own hands and that's exactly right we've got um we're in control of the expenses that go out of this organization and we'll have those following the revenue line uh moving on then to the the reinvestment focused here on the investment into the R&D space as Santa referred to the the Gen 2 engine that we have it's really um the critical investment that we're making and and the key the key component in that is it's investing for long-term growth so the migration across to the new platform is our future strategy you can see that we made a step change in the level of investment that we made into the R&D space in 2023 and we increased that further in 2024 and that's really the people costs coming through and the other component of that is the investment that we're making is into the people who are driving that product so it's it's investing now for the future uh investing now for a platform that will enable future revenues coming through and better returns back in the long run when we're looking at it internally um we generally use the SAS metrics to to review the the customer Journey that we have these are the the metrics that we measure uh ongoing every month we review these measures and it's really to focus on the journey that a customer makes in financial terms when they're coming through through our um our financials so one of the key challenges with these is is the definition of of what we have so a customer for these purposes we measure as um somebody who's run a pay in any given month and we know that we have natural cycles so it's less than perfect data but it's a really key indicator as to to how we're tracking with our customers so from a SAS perspective we're currently um spending about $510 for every customer that we acquire that's been up slightly on last year mainly because we acquired fewer customers than last year and also we've spent um additional funds and that's just a reflection of the market and where we've put our efforts um this year which has been focusing on the future product not not so much the current product so acquires cost of $510 to acquire a new customer each of those customers they we then derive a monthly revenue of about $91 per month from each of them now that's made up of both the processing fees that the customers pay to us and the interest income that we earn on the funds that we manage on their behalf so you've got about a a six Monon turnaround in terms of recovering the funds um of the the acquisition cost which is is very reasonable in in SAS terms we then have a a cost to serve those customers so that's mainly the cost of hosting and supporting those customers and that cost has gone down a dollar per customer from $22 last year to $21 and again that's the financial metric coming through to reflect those efficiency gains that we've made in you know investing into the platform that we have and making those self-service components much easier for those customers improving our knowledge base um giving the customers fewer reasons to pick up the phone and call us is a key component of that and that's that's the investment into the tech that's gone through there and then um we look at how long customers stay with us and customers stay with us this is an inverse metric based on on the turn percentages the turn has gone up very slightly it's gone from an average of 1.15% per month to 1.18% per month and in these times that's not an arming metric um entirely comfortable with that and when you reverse that it means that customers on average stay with us for seven years we have had a bit of a change in how we measure that so you can read about that if you're interested in the comparisons within the annual report and overall you multiply all those together and it means each customer um on the averages is is worth about just under $66,000 to us um and when you multiply that by our customer base it means our total customer lifetime value overall is about 43 million dollars um we're happy to take questions now hopefully there's been a few questions come through on the chat as we've been talking um but yeah I think Todd should be available to to let us know if there's any questions great thank thanks Jamie H there's one question to come through from Matthew chin can you give us an estimated number of how many uh customers the wholesale opportunity could bring no uh we don't provide future guidance Matthew sorry about that um we just all we can do really is paint a picture of of what we think that the um you know that could look like um we're in the early stages of that so we can't provide indicative numbers on that that would be that would be guidance that we we don't have that too I don't if you want to shine a bit more light it's it's it's at the early stage as we develop the market and and get product out there and sign up new customers will will get a much better handle of of the size of that opportunity uh there's no further questions that come through in the chat but is there's any other if in if there's anything else that comes through uh happy to take it um just a recap you know we we're really proud of the achievement that we've made uh it is a significant milestone for us there's a lot of hard work for a whole bunch of people committed to the cause that has gone in I'm really grateful to be surrounded by a fantastic team a great board um and and and finally a big thanks to the shareholders who support us um and for continue to to be Believe in Us and and who have been there and who continue to be there for us really appreciate that thank you so much and um we look forward to any other questions you got sent through we'll we'll answer that directly thanks one question's just snuck through at the end here from Ian frame just to clarify it seems that the $91 of arpo is actually monthly rather than annual is that correct absolutely y that that is that $91 is the average revenue per month um so the if you compare that the cost of acquisition we're talking about a five to six month return uh which puts us at the top end of um SAS providers in terms of our cost of acquisition is significantly better than the majority of the comparatives that we look at great thank you asan no further questions have come through thanks so much