Crimson Tide (LSE:TIDE) — Full Year results

0:00 Good afternoon, and welcome to the CRIMSON TIDE PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the Q and A tab situated in the right hand corner of your screen. Just click Q and A, scroll to the bottom, type your question and press send. Company may not be in a position to answer every question received during the meeting itself. However, the company review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Barry Ritt, Executive Chairman. Good afternoon.

0:32 Well, good afternoon, everyone. Thank you for attending the IMC broadcast of CRIMSON TIDE PLC's full year results. I'm going to be with you with, for a very short time, Jacqueline Daniel, chief executive officer, and Peter Herso, finance director and company secretary, are with me. They're gonna take you through the results presentation. So without further ado, Jackie, we're in your hands. Thank you very much, Barry. Well, welcome everybody to the CRIMSON TIDE Preliminary Results Presentation. I'm going to ask the finance director, Peter Hertaff, to walk you through some of the financials. And then I shall take you through what investments we've been made in growth.

1:18 We've made to date 3,100,000 investments since the fundraise. We'll talk about what we what we've invested in the product development, including IoT, the investments that we've made in The US,

1:33 the investments in marketing, particularly particularly the partner strategy and our growing partner acquisition pipeline. And lastly, the investments we've made in scaling and streamlining our internal structures. I'm hoping that Barry then will give you an update on some more corporate matters. Okay. So I'd like to hand you over to Peter, first of all, to walk you through the financials. Thank you, Peter. Thank you very much, Jackie, and good afternoon, everyone. You'd have seen the announcement that our turnover increased by 30% to 5,400,000. We're very pleased with that and also maintaining our 84% gross margin. As can be expected following the the fundraise, admin expenses increased to 6,000,000 for the full year. It's important to note that included in that 6,000,000 is 800,000 of amortization of our intangible software, And all of that resulted into a loss before tax taxation of 1,600,000, very much in line with what we have communicated to the market previously.

2:42 Our most important financial metric, annual recurring revenue, increased by 51% to 5,750,000 at year end. Cash at the moment is 3,100,000, and it is leveling. And then another important metric for us, revenue churn, 3.8%, so very low.

3:06 We've been asked by some investors to include more traditional SaaS metrics. We are working on it, but one of the challenges is we don't define ourselves as a traditional SaaS company. We're more software with a service. And one of the challenges that I'd like to highlight is customer acquisition cost. For example, our top six customers, the the true acquisition cost in terms of peer marketing was zero. It was due to word-of-mouth and and the like. And there are some interesting stats. The only one that I'd like to additionally highlight is our average customer lifetime of fifty four months, and that's something that we're working on refining also. We think something like a revenue adjusted average lifetime would be would be more appropriate, and the average customer lifetime would be increasing.

3:57 So in short short, what I'd like to say about this specific slide is that we are working on on more traditional SaaS metrics to to deliver that, but in a fashion where you can evaluate the company better rather than a broad brush approach and just the the normal SaaS metrics. On the following page, we have some traditional SaaS metrics related to marketing and sales. Jackie, would you like to address these? Yes. Sure. Thank you, Peter. So you can see here a net promoter score currently of 30, which is excellent. So net promoter score is the likelihood that you are to recommend the product to another company. So that's very good currently. Deal stage, so this is the opportunities as they travel through the pipeline from appointment to demo to qualifying through to procurement. So that's a snapshot in time and can tell us through a trend the health of the pipeline, really.

4:59 And time to close on the one deals, the average time at the moment, a hundred and one days. Again, that's more about looking at the trend and the context in which that's happening. So that metric alone doesn't tell you a great deal. So it really needs to have some context with it, which is what we're going to be working on going forward. In terms of investment, we've made a 3,100,000 investment to date since the fundraise some nearly two years ago. And this is showing the allocations of that investment broadly. We've started to split this out in a bit more detail for you. Originally, we were telling you that we were investing in the platform and marketing, So this shows you a little bit more of that detail.

5:49 The development specifically has been a million pound of development in the product. There's been £500,000 on internal scaling and streamlining. We've invested, naught 700,000 in The US office and the operations there. And also, we've invested, naught 0.9 in marketing, including some marketing we did for the Bead Pro product. If I just move on specifically to the product and what that money has gone on specifically there, It's mostly gone to, upgrades as well as innovation. So the whole of the back end of mPro five, so the client side web application has been completely upgraded.

6:40 That's a very large and a very significant piece of work and allows not only our clients, but allows us and our internal development team to do a lot more. It means that the Ionic framework, is now much more powerful for our developers, and it allows them to write a single development code across the entire platform. And that Ionic framework is now the basis for the front end for the mobile app platform upgrade, which is currently being rolled out this year. As well as those major upgrades, and they are major, it's also allowed us to go on and do further innovation. So for example, we have reengineered the entire IoT back end for our enterprise customers, and that really allows us to scale.

7:33 So there'll be no constraints in the future in leveraging the relationships with our partners, particularly those partners like Cisco Meraki. So for instance, you have probably seen the recent announcement about our deal with Cisco Meraki in North America. And up until this point, the IoT platform has been supporting, IoT products like cameras and sensors, but in their hundreds. And going forward, those will be in their thousands, and it needs to be unlimited. So the reengineering work that we've done there is going to allow us to do that and support all of that going forward. IoT is a is a big development for us and is already showing paying off quite well.

8:23 We've also made investment in what we call project TIDE PLC, and that's the project name for the replacement of our automation engine within mPro five. So that's the really clever bit. That's the bit that turns those business processes that have been automated by mPro five and allows the customer to really manage them in a clever way. And the idea behind this reengineering is it's not only going to maintain our very high margin, but it's also gonna help to improve our margin even further. But it also provides us with the opportunity to upsell this this clever bit and this automation engine to our other existing customers who can benefit greatly from it.

9:13 I'm going to update you on something called the b pro product, which was originally marketed as our m pro five for trades. We ceased that marketing last year, and we're now using the development of that app in our mPro five for much smaller clients. So nano businesses and those with a smaller user group, so below 10 users typically. You may have been showed in the past a very sleek, a very modern, a very clean UI UX to that app, and that is the UI UX that we are now using on the mobile front end for our enterprise customers. And we're also using this apps analytics, in terms of measuring and monitoring our customer usage across our platforms.

10:07 So until now, that hasn't been done before. We'll be able to see what features they are using, when they're using them, how much when they're dropping off, where they're using them, and who is using them to do what. So basically, we'll be using that app as as a marketing medium in this in this state to our users where we nurture them in real time to drive engagement via push notification, email, and very much in real time. What effect does all this development work had on our pipeline? Well, it's had a very positive effect. The pipeline growth has continued to increase in the second half. And here on this slide, we're showing you the key areas where that pipeline growth is coming from. And you can see that IoT and specifically in The US is contributing greatly to that.

11:05 Despite the pipeline velocity speeding up, we are able to keep it very well stocked. This is certainly the the biggest pipeline I've seen since I joined the company. And I attribute this to our much more focused marketing approach. We no longer generate any, what I call, random leads. MQLs, SQLs are pretty meaningless really in the enterprise world. But it's very much more about targeted qualified accounts that really match truly an ideal customer profile. So we're focused down what we can do for one customer, we can do for another. And there's plenty for us to go at and more than reach our numbers just by doing that alone. This next slide is beginning to show the sources of the opportunities as they travel through our pipeline. It's very early stage, but you can see from this that a great deal come from a direct approach from m pro five team, but I'll come to that in a moment.

12:08 Then we get a significant pipeline referred to us by one of our partners. We also have existing customers joining our pipeline, and we get referrals from clients, existing and former clients, as well as the usual searches, both organic searches and paid for. But what I want to stress to you is that the identified sources are never single within one deal. So the way that marketing collateral is taken up is is not sequential. It's not straight line, particularly in digital. And engagement is always a compound effect to get to that conversion. So you'll see that, for example, a opportunity might visit the website, download a case study, download a guide, really engaged with that, and then our team might have contacted them directly.

13:07 So it's always more than one piece of collateral that they've engaged with, but what this does is identify what our team regard to be the single greatest trigger to join that pipeline. I'm going to give you an update of what's happening or what's been happening in our North American office in North Carolina in Raleigh in the state capital. You will remember that earlier this year, there was an announcement on our San Francisco deal there with Meraki. Now this is the Cisco Meraki's head office in San Francisco, and this is being used as not only as a showcase for their sales teams and their partner sales teams and their distributor sales teams, but it's also being used as their actual building facilities management and smart buildings software.

14:08 And so they've got an opportunity now to roll this out not just in the San Francisco office where it currently is around $7,000 MRR, but also to their other offices including Atlanta going forward. So the team in North America have been very busy these last few weeks with the deployment of mPro five's smart building solution for Cisco Meraki. And this is where mPro five is being used specifically to visualize the building's sensor data. So Cisco Meraki have installed, in this particular instance, over 500 cameras and sensors. And these pick up and record things like air temperature, humidity, air pollution, ambient noise, door openings, door room occupancy, button presses, all sorts of data is collected.

15:06 And the m pro five dashboard is now installed in the Cisco Meraki office for their teams to have access to all of that information in a smart way. So I'll give you a very, very simple example. They have access to a floor plan dashboard that will make a room, let's say, a set of toilets, light up red when they need cleaning because their usage has increased and the cleaning schedule hasn't increased accordingly. So a prompt is sent to on on

15:39 the mobile device, on the app on the mobile phone for the nearest cleaner on that floor to divert from his or her schedule and go and clean in that particular area. So it's being used in a very efficient way in their operations, and that's general facilities management. But as I say, it's also a very powerful showcase for their sales teams and their distributors sales teams. It's really being marketed as the turning IoT products, so these cameras and sensors into smart solutions. It's already flowing into this year's work, so we're building on the work of 2022. So you have also seen that very recent announcement on the NHS Trust. So, again, this is using IoT and smart solutions as well as their usual 50 check and NHS data and really compounding and collaborating all that data into one area and making really smart and efficient use out of that.

16:43 Sticking with The US for a moment, but this is not just The US. This applies to The UK office as well. I talked about adopting a very much more focused on partners approach, and this is very effective. We've got on this slide four very big heavyweight partners, Cisco Meraki, Cisco Glue as we refer to them, CDW who are a distributor, and SHI who are a very large global systems integrator. So this has opened up for us

17:19 basically, essentially, teams of of hundreds of salespeople who are very keen to sell Cisco products, Meraki products with the mPro five solution because it makes their job selling a lot easier because they're selling a package. They're selling IoT hardware with the software that makes it really smart.

17:44 The last area that I want to explain to you in terms of our investment is the work that we've been doing, which includes streamlining to a right sized team. So these are some of the key hires that we made last year. The focus is very much on operations for scaling, and we're about there. So these are the key hires, head of finance. We beefed up that finance department. We have a new nonexecutive director who's replaced a retiring director, and we have a US specific market marketing executive who has joined the Raleigh team. So we have a team of a sales and marketing team of three there now. So that is ready to scale going forward for these partner sales teams as I've described.

18:33 And then a project manager and some business analysts who have streamlined the what I'm referring to as the customer facing operations. So the customer success, the customer excellence, the customer support team that is completely

18:47 streamlined now and completely scalable, and last but not least, a dashboard specialist. I'm going to hand you back to Barry because I would like him to update you on some corporate matters, and then I'll sum up for you. Thank you, Jackie. We're elevating the structure of the company to what seems more appropriate for this stage of our development. Last year, we appointed new auditors, panel Ker Foster. This is their first year of audits, and they are at a higher level than the previous auditor. In addition to the nonexecutive director we appointed last year, we have identified two new nonexecutive directors who are going through FinCap's audit process at the moment, and we hope that they'll be appointed in the coming weeks or months.

19:43 Steve Goodwin, who's been with the company a very long time, is no longer independent and, due to his length of tenure and will be retiring at the AGM. We have a new significant shareholder, William Curry Group, and it emphasizes what a a very good shareholder base we have. From institutions to private investors, we have very high quality individuals and organizations supporting our share base. And we will we'll be undergoing a corporate structure review. We'll be closing down some, old redundant subsidiaries, changing some of our billing, in The Middle East and Northern Europe, and fundamentally going through an entire share structure review, including the formation of an employee benefit trust to enable some of our middle managers or long tenured employees to participate in the company's growth.

20:48 I should add that there is no requirement for further capital to grow CRIMSON TIDE organically. We're very well set with the capital that we we raised in 2021. And we now have a a which is extremely well formed. These changes will take it to the next level of compliance and ensuring that all of our policies and structures are correct, if you'd like, the next stage of the company's growth. Jackie, I'm going to hand back to you to summarize the, results of our presentation, please. Thank you, Barry. So to summarize, the really significant growth in our contracted revenue, and don't forget that's over 50%, 51% growth in contracted revenue, our ARR, I believe should really excite you, especially if you are a shareholder of this business because it's starting to evidence our growth through the investment deployment strategy that we've adopted.

21:55 By investing in the product and its development, plus investing in the people and the structures with a very strong pipeline and a partner strategy that's producing a channel whilst we're maintaining a very healthy cash balance, results in growth that can be scaled and sustained growth without any impact, any negative impact on our service. And it's our service that makes us so sticky and is our unique selling point in this market. And I think that sums it up nicely really. That's fantastic. Thank you all very much indeed for your presentation. Ladies and gentlemen, do please continue to submit your questions using the Q and A tab situated on the right hand corner of your screen. But just while the team take a few moments to review those questions submitted today, I'd like to remind you that a recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

22:53 As you can see, we've had several questions that have come through throughout today's presentation. Thank you for everyone who submitted those. Can I just please ask you to read out those questions where appropriate to do so and and give your response or pass it to a member of the team, and I'll pick up from you at the end?

23:08 I can do that, Paul. Thank you very much. Handling the questions slightly as one, long story or answer, to them all. Firstly, in respect of broker forecast, please do email Peter, [email protected], to get broker forecasts. In the context of this call, I can tell you that FinCap perceive, in excess of 30% growth, in the coming, two financial years. They also perceive that we pivot to profitability this year, and, that will be in in respect of a particular month and that the business returns to its more natural home of profitability, next year, and then there is re results of growth.

23:59 And the second question, is around operational gearing, and you will see in those, numbers the effect of that gearing particularly in this end of this year and the beginning of next year. So our slide presentation shows you that we have 50 members of staff. We only really have one senior executive vacancy of a chief marketing officer. And we do also plan to appoint some more partner managers, but those appointments are growth focused, not fixed cost focused. And that's important to justify any further hires.

24:47 Yes. There will be hires in the support team, but only in respect of considerable growth in the company's annual recurring revenue. And in fact, we're also working on ways to ensure that automation ensures that we don't need employee growth in those areas. So you can say from the presentation that we have rightsized. We've now got the right people in, sales and marketing. The business analysts are critical because we've moved to a more consultative model with our customers, and there is no fundamental requirement for people in HR accounts and the the general fixed costs of the company.

25:35 Peter sort shows you an admin cost, last year of, 6,000,000, and there will not be a substantial rise, beyond that. But do ask Peter if you need a copy of the broker forecast by email. Regarding The US opportunities, we try very hard not to overstate the capabilities for growth or the opportunity for growth. There there is absolutely no limit on the the partner size that we can attract either through original equipment manufacturers like Cisco Meraki or through distribution partners like CDW or systems integrators like SHI.

26:25 These companies offer a different scale to us, and they're also extremely competent at what they do in their individual area. So our goal is to enable a Meraki partner or a disruptive technologies partner to be able to simply add mPro five to their sale. And the Cisco Meraki building opportunity that Jackie showed you earlier and the National Health Service opportunity we outlined in an RNS recently shows us going to a much more commoditized model in mPro five. And that's deliberate so that partners can sell easily. This is a situation where an integrator might be adding a new CRM system, a new FM system, CAPM system, ERP system, and the goal is to just add mPro five, to their offering, and that is proving appealing.

27:23 In terms of competition from the IoT component, there is massive competition from IoT sensor providers. But what those sensor providers do is they give you the data and a dashboard of the data that you can certainly analyze, motion, temperature, humidity, TVOC is air particulates. But what mPro five does, our algorithms take combinations of those data. Sometimes they take simple readings, but sometimes combinations of those data. So for example, if the temperature has gone up in a room, it's not necessarily that the air conditioning has failed.

28:08 If you are light to door openings, it means there are more people in the room. Therefore, the temperature rises. There's a fascinating statistic that around 50% of data centers actually do not need air conditioning. They need somebody to open the door. And combining these algorithms, and the NHS is a very good example, we can start to look at efficiency and cost efficiency of space on a per meterage basis. I think you can see it's difficult to represent on the screen, so I'll go back to the slide. Is you can see on the left hand side, that is a three d model. It literally behaves, it's almost using some gaming software to show, the three d model. And you can see with the colors there, we're highlighting different types of, room and different readings affecting that room.

29:05 So lots of competition with sensor providers. We don't see any direct competition in sensor driven actions. Result of sensor reading, result of our algorithm, greater than, leads to greater than expected efficiencies in actions related to those. Our operating margin, our consistent target is 80%. We've exceeded that for many years. The only thing that will affect that is greater payments to partners, which could, in our forecast, result in a 5% reduction in margin. However, that is the partner's share of a sale. Now what we don't forecast or we don't have in our forecast is an explosion of sales from partners.

29:56 So any reduction in the margin and the margin reductions are in our Azure costs and some of our commission costs. If there were a reduction of 5% in the margin, you would see a significant increase in partner sales. I'm particularly excited by the sensor driven combination. I can give an example which is under development where if we combine a, sound footprint from a from a a gunshot and a an analysis of the air particulates of gunpowder, we can actually alert people as to the result of gunshot actions, using our sensor driven action.

30:49 I'm also excited by a health care offering, which will regain focus in 2024, which, time seems to fly, doesn't it? It's only in, eight months' time. But our health care offering has been has taken a backseat to our growth in enterprise and our growth in the trades application, which leads to the mobile application upgrade along with the web application. But I'm also excited by things like, we have mPro five in use in a pilot in the detection of people consistently stepping over the yellow line at railway stations. And we're starting to write algorithms and analysis that can lead, a station employee to, those crossings, x crossings in y time leads to more likelihood of people on the track and the consequent the worst case consequences of those. So I'm excited by a lot in the business.

31:55 We have to make sure we focus. Enterprise is providing great growth in in MRR. Margins are still strong. And as one of the questioners ask, you know, does that flatten out in terms of cost? Yes. It does. So I think we can provide some excitement from internal growth, and we can also provide excitement from partner growth and innovation. The competition is widespread because we deal with what we call point solutions. So there are plenty of organizations that, for example, do a ticketing application for transportation, plenty that do FM applications, auditing applications, form filling applications.

32:49 But when you see the breadth of mPro five, you realize that there are very few organizations that can respond to a an opportunity in IoT, an opportunity in retail where, let's face it, two of our largest customers are two of The UK's biggest supermarkets, opportunity in health care, opportunity in waste management in The Middle East, FM in Finland, or wherever organizations, partners, leaders across, The US. If you'd like a review of competition directly, I think the most, the closest competition is an organization which is, based in temperature management in in food. It's an A list of company. I'll ask you to do your own research onto into which one.

33:42 We never denigrate other companies. Lots of hard work goes into to building a business, but, you'll find them, if you look. But in general, the biggest competition are individual point solutions to individual problems. I'm scrolling through, and I rather hope that I've given you some sort of cogent answer to all of the questions. And I think summing up, they do have a theme running through them before I hand back to Paul, which is that this business is growing well. It has very good margins. It has reached a level where costs are fixing.

34:28 The cash curve is leveling at 3,000,000 with around 1,500,000 of debtors and no great creditors in the balance sheet. We're excited for the future. We're excited by sensor driven actions in The United States, and we're excited for growth in CRIMSON TIDE and net profile. That's fantastic, Barry. Thank you very much indeed, Dan, Jacqueline, Peter as well. Thank you for addressing those questions and updating investors today. And of course, if any further questions do come through, the company will be able to review those questions. And we'll publish responses on the investor meet company Barry, was gonna ask you for a summary, I think you've just given it. So thank you very much indeed to the team for updating investors today. Can I please ask investors not to close the session? It should now be automatically redirected to provide your feedback, and all the team can better understand your views and expectations.

35:21 This will only take a few moments to complete, and I know it's greatly valued by the company. On behalf of the management team of CRIMSON TIDE PLC, we'd like to thank you for attending today's presentation. Thank you, and good afternoon to you all.