Elixirr International (LSE:ELIX) Q2 2026 Earnings Call

0:00 Thank you Sunila and welcome everyone. Thank you for the time and for joining us. First of all, I just wanted to give an apology from Steve. He's got a planned medical procedure today, but he's hoping to rejoin the roadshow tomorrow. But in the meantime, myself, Graham Busby, I'm co-founder and deputy CEO. Nick Willock, CFO.

0:20 And M. Carl Lewis-Smith, a client facing partner and head of IR.

0:26 So we are very proud to announce another record set of results today. I think it's good indication that the diversification plan we've put in place over the last few years is working well. Revenues are up 25%. EBITDA is up 29%. And we've really focused on the quality of the growth and value of our work. And I think that's reflected nicely in the 31% EBITDA margins. We're seeing more and more AI demand, and we're obviously going to go into a fair bit of detail on that. I think when you look at previous tech cycles, like the mobile cycle, it's always been the infrastructure gets the value first, and then this is followed into services. And we're seeing that shift now in AI.

1:11 It's an exciting time. There's been a recent study by Gartner and BCG around a $200 billion market opportunity for technology services in artificial intelligence. And we've ourselves have seen 185% uptick in revenues from the two comparative periods. So we're looking forward to eating further and further into that new demand. We're also seeing that markets moving towards senior advice and hands on tech delivery. Interesting partnership between Accenture and Google do just that a few days ago, by putting in 1000 engineer specialists, we've been building that ourselves in particularly since IPO in 2020. When you think we've got strategy, data, AI, tech, and combining that into execution, we're in an exciting place for what we're doing with our clients. And we will give you a few examples of the value that we've added in H1 this year.

2:08 We're also seeing broader capabilities and deeper client relationships. Cross-sell now is over £100 million since IPO. That's working really well. Our number of gold clients are higher than they ever have been. and we're doing more and more high-value work. Looking at some of the highlights, if you like, I've spoken about the numbers. Nick's going to step through in more detail. The client relationships I mentioned, we are getting a broader and more in-depth relation with our clients. They're trusting us with more complex mandates than before and really engaging us on more capabilities than before. Looking at the numbers, We have 35 clients that on a trailing 12 month basis, we're giving us a million pounds plus in revenue.

2:55 We call them gold clients. And 24 of those are actually 2 million pounds plus, and that's up 50%. So we've got some brilliant relationships with some of the best companies in the world, which we're very proud of. And that on the bottom left there has helped us really expand the cross-sell. It shows that our strategy is working. Cross-sell is up 27%. 19 million pounds versus 15. And like I mentioned, you know, 100 million pounds since IPO. And we also did the acquisition of quadrant in in the period back in January. You know, these just remind you that kind of experts in commercial transformation, go to market excellence and transact transactional services, working very closely with TRC, we're making a big impact on our combined client set.

3:42 And that AI led transformation in the middle there Combining AI tech and operational expertise is a big area of the business we're really leaning into and expanding. And all of this really is giving us a lot of great recognition in the marketplace. If you look on the top right, there's just a couple of hand selected examples there. And we chose these ones because this is actually from feedback from clients and industry peers. These aren't kind of pay to play awards. So Forbes, you know, America's best management consulting firms, Also one of the world's best consulting firms and the FT again for the fourth or fifth time, putting us as one of the UK's leading management consultants. All of this isn't possible without a great leadership team and a broader team.

4:31 We appointed another non-exec onto the boards in the period, and we've got four new partners. One of them through the quadrant acquisition and three from the industry really strengthening AI data and tech capability. So record financial performance, deeper client relationships, stronger capabilities, and we're continuing to invest in our platform means that we're nicely positioned for growth. And I want to just a point here, just aware of a value gap that we're doing our best part to close. If you look at this graph here, the purple line, the solid one is Elixir's revenue growth over the period. The lighter purple is share price growth. I think today that that gaps got a bit a little bit wider.

5:17 But then compared to the FTSE 100 average revenue growth, which is a solid blue line, and the FTSE 100 price return, which is the lighter blue, you know, we can see that there is a big opportunity here for us to close. But quite honestly, we just wanted to say, you know, we are going to continue doing what we're doing. Our strategy is working the four pillar growth strategy, organic growth, deeper client relationships, selective programmatic M&A, sustained premium healthy margins. This is the right way to try and close that gap. But we're also doing things to target further actions. So a good example is bringing on Canaccord as a second broker in the period. And we've engaged particularly with their US investor base, I think a few that are on the call.

6:04 So welcome to you. And we're really looking to strengthen those relationships. So we all believe strongly that sustained revenue, premium profitability, differentiated platform gives us a great foundation for long-term value creation. This is also actually strengthened through AI. Again, there's a big narrative in the market about the threat of AI for consultancy. For us, it actually improves our competitive model. And we've discussed some of these points previously. We are senior-led by design. AI actually amplifies the fact that we don't have a massive pyramid, especially at the junior levels. If I think about some of the big strategy firms, as an example, they have over 10,000 analysts at the bottom of the pyramid. And really, that's been years and billions of dollars in the making to get that and is being fueled each year to replace as they either leave or go up through the pyramid.

7:04 AI is certainly doing work in that layer of the pyramid is taking the the sides of that pyramid and it is disrupting for us we don't have that type of pyramid we have a very um tube structure of uh organization and ai for us actually levels the playing field because it means we don't have to spend those billions and all those years creating that that asset if you like and you can see you know just looking at the security of of who we have um we're doing internal partner promotions We're doing external partner hires, and actually 30% of employees are principal level or above. So we are certainly senior led by design. And that is why we are in boardrooms talking to chief executives and their teams. Also, and I'm just going to dive into a lot of the more detail, it increases our productivity, our capacity and our speed across the business.

7:59 We've rolled out the elixir AI operating system, which is some propriety agentic platform that we have. This is saving us a lot of time on projects and it is making us far more efficient and speedier in the way that we deliver. yeah I think we've now got agents covering 73% of recurring delivery activity, including project management style tasks, and that is something that we are again leaning further and further into. And that is where looking at you know the third column there. It is allowing us to get deeper and build stronger relationships with our clients by being able to do all these things that maybe we couldn't have done before. Execution Edge is also something we've launched in the period and is a big differentiator for us. And really, that's us focusing on the human systems particularly important with executing AI agendas. And it is something where, you know, Thinking about the judgment on top of AI and making sure the leadership teams understand how to responsibly use it and deploy it is a big part of it and making that successful.

9:03 But it's not just an AI capability. It just happens that we are being used in that space. And that platform that we're building, it compounds the capability that we have in place. So I think at the bottom there about taking market share, this is an important point. And to kind of summarize that AI does commoditize a traditional consulting work, but it allows differentiation in the judgment expertise and execution place. And that is really where we're strongest. So we're excited about the future. And we're excited about where we're where we're going with our clients. I got hand over to Nick to give you a an overview of our financial performance.

9:42 Thanks, Graham. I'm very pleased to present another strong set of financial results for the half. So Graham touched on some of the numbers, but just to go through them in a little bit more detail. Revenue up 25% to 89 million, gross profit up 26%, adjusted EBITDA up 29% to 27.6 million pounds. And that's a 1% increase or 100 basis points increase in margin. So adjusted EBITDA margin of 31%. We're very much focused on higher margin work and not to chase some of the lower margin, more commoditized revenue that obviously is there in the marketplace. Adjusted profit before tax increased by 25%. So that's the flow through of the growth in adjusted EBITDA with then the impact of the higher interest costs, given the deficits we've got in place to fund our acquisitions.

10:35 Adjusted diluted EPS increased by 18% to 34.2 pence. and that followed the growth in adjusted profit after tax then other than reflecting obviously the higher share count that given the shares we've issued for the acquisitions on TLC both the initial and the earn out shares this year and and the initial shares for Covadrant and our free cash flow I mean is always seasonal I'll cover that up in detail on a slide in a minute but there were some particular reasons why it was abnormally low in this half and I'll go through that in a in a moment but you know i think from a long-term perspective this business is as cash-empty as other as this always has been uh but i'll go through the reasons for that net debt we closed the period with 56.5 million pounds of net debt and that number will be substantially lower by year end see the increase in net debt principally reflects the funding of the acquisitions that we've had in in the half um the acquisition of collateral and the earn out payments for trc

11:37 Rinko and RGG.

11:41 Sorry, did someone just go on mute, please?

11:45 Richard Leonard, maybe? Go on mute.

11:47 Just putting those numbers I just went through, just in context of our results since our IPO back in 2020, we've continued our track record of growing revenue every year and growing EBITDA broadly in line with revenue. You see that green dotted line at the top there, our EBITDA margin every year is around about that 30% level. And we certainly see that as sustainable in the long term. And I think just the last couple of years, you see there that actually, We're now creating more revenue in EBITDA in one half year than we did in that whole full year in FY23. And we've done that by our four pillar growth strategy that those of you who've been on these calls before will know. We talk about stretching our existing partners to increase revenue per partner, particularly as we give them more services to sell in their toolkit, promoting partners. promotion people internally to partner is always very successful for us because those principles know the firm know how we operate and have their own set of clients before they get promoted and hiring partners in from the outside world who come in with their own relationships and contacts and acquiring businesses our inorganic labor but you know that strategy is a strategy that's delivered for us over the last six years and we very much continue to continue with it over the future by the six years I'm just unpacking a little bit of what's happened with revenue in the six month period.

13:14 So revenue in the six months increased from 71.4 million in the previous year to 89 million in the current half period. There was a 1.6 million negative impact from FX. Obviously the US dollar weakened by about 4% compared to the comparable period. It's important to note that actually this doesn't impact our profitability. Our cost basis broadly matches our revenue and therefore there's a natural hedge in terms of profitability impact. In terms of organic growth, which was 5% in the period, that's a combination of end of programme, net growth in existing clients and new clients coming to the firm. We did have several large projects, programmes of work that came to an end with clients where we successfully completed that work, the client was happy with the work we did and that programme came to an end. It doesn't mean that client doesn't come back, it means that they've They don't have any revenue in this six-month period, but we often see those clients come back in a subsequent year when we talk to them about new opportunities.

14:17 And then at the end of program was more than offset by the net growth in existing clients, 7.6 million, and growth from new clients in the period of 8 million. And then the contribution from acquisitions, 15.7 million. That's the half-year impact of TRC that we acquired. From a cash point of view, we are a highly cash-generated business. This is a business where EBITDA or less corporation tax turns to free cash flow. Now in this half we've just gone through, as I was touched upon before, free cash flow is always very seasonal for us. So in half one, we have much lower free cash flow than we do proportionately for the whole year. And there's two reasons for that.

15:08 From a working capital perspective, debtors are always much higher at June than they are December because December is the lowest revenue month of the year. And from a payables perspective, we pay our annual bonuses in half one for the full year, the previous full year, and therefore you have an outflow in payables, the amount we're paying out uh being in excess of the amount we're accruing for the six month period so those factors you always see which is why the half one number for free cash flow is always fairly low and then in this half there's there's three other reasons which which when you put it onto a relatively low number in the first place you know disproportionately impacted so trc came to the group with some debtors on 60 days and some debtors on 90 day terms a group standard is 30 course over time we will be exercising the same discipline with new clients that come into TRC as in the rest of the group where the vast majority get contracts on 30-day terms but it does mean we have to live for a period of time with some of those clients on longer terms it's important to stress these are not clients who I'm concerned about from a credit perspective these are blue chip clients but it's just not practical for us to renegotiate their terms down immediately so that that has that's what's driven the most of the increase in the trade debtors outflow compared to what you would see in a normal H1 period.

16:25 And then from a payables point of view, it's not that we have accrued less. We accrue our bonuses for the six months and we haven't accrued less bonus than last year. We've accrued about a million pounds more than H125. but the bonus that we paid for FY25 full year was about five million pounds higher than FY24 and therefore the impact of that and that's the amount that we obviously paid in H126 and so the swing that you see from that perspective disproportionately impacts working capital and then there's then allies that there's just a change in timing of tax payments particularly given the timing when TRC came into the group and the payment of tax for them which meant that our tax cash tax payments were a bit higher this this half so Those are the facts that impacted free cash flow in the half. I do expect a lot of that to reverse to the full year and obviously by the end of the full year net debt will be significantly lower than the number you see there of 56 million where we were at the half. During the half we did have cash outflows to the acquisitions so the roughly 16 million pounds which was TRC's earn out We did close the period with headroom under our debt facilities of £18 million.

17:34 We are obviously, as I said, deleveraging. We are now paying down our term loan. we made our first repayment for June and we were making two more repayments on our term loan in September and December. So our net debt at year end will be in the order of about 0.7 times at EBITDA, not much more than that. From a balance sheet perspective, I mean, the changes in the balance sheet really are those you would expect. Obviously, intangible assets went up given the acquisition of Covadrant. I've touched on the fact that we've got now some clients in the group with extended terms for trade receivables. I mean, as I said, I've got no concerns about credit worthiness of those trade receivables you see on the slide there of 37 million, you know, there'd be less than 5 million from half one that's not being collected by now.

18:42 And most of that will get collected in the next couple of weeks to clear that out. Deferred consideration, continued consideration, we've got 25 million pounds on the balance sheet. predominantly relating to TRC, where there's a maximum of $36 million to be paid and about 5 million pounds per compartment. We've got about 80% of those approved on the balance sheet. I thought we'd just also include an update to our dilution model that we showed in previous results presentations. This is the illustrative example of how dilution might unfold in the future. This is a topic that has, you know, has interested shareholders over the years because we do issue a lot of share options which at first sight can be quite diluted but it's important to say you know we're all big shareholders ourselves we very much control our dilution and we only dilute when we absolutely have to so we've only diluted historically by 11% since 2020 and that's all to do with acquisitions at a time when we've grown the business you know significantly and not by the equity incentives where we've used cash to offset the only dilution from the equity incentives so This model just projects forward all of the existing equity programs that we currently have for our employees and partners, both people who are in the business and people we would expect to add into the business as the business grows.

20:02 And over those next five years, at a 20% growth rate, we would still only have a cumulative 18% dilution over that time. And that's without using any of our cash to us that dilution if we just let it all flow through into dilution. And for those of you who are new to our story, which is important to point out, although you see the headline numbers for the number of options we grant in the notes to our results INS, you know, only 30 to 40% of our options ever vest because they have four to five year requirements to work in the business before any of them can be exercised. There are stretching performance targets each year, both for employees and for partners that they have to achieve. And so, you know, the net of those two impacts is probably, you know, I would say between 30 and 40% of the options will vest. And all of our options are granted at market price.

20:48 So there's no discounts to the low market price. And so the dilution impact and the reward to the employee is only from the growth and the share price from the day that they join.

21:00 So to recap our proposition, we intentionally span a number of capabilities at Elixir in terms of what we can do for our clients. That spans from boardroom strategy and transformation all the way through to execution. And on this slide, just a snapshot of some of the large brands that we've worked with over the half year in 2026. These are clients that we have very recently worked with the clients that we have supported across a number of the capabilities on the left hand side. And it's a mixture of those capabilities that really gives us the ability to deepen our client relationships. As Graham mentioned, we now have an increased number of gold clients and clients that are earning the firm over 2 million of revenue a year.

21:45 We're able to deepen those relationships by pulling on this suite of end to end capabilities on the left hand side of this slide. And just to bring to life some of the work that we've done for some of the names on this slide, And in the research and insights capability we've been working with a major technology firm to create research led thought leadership to help them market their services into their business to business market. That has resulted in demand generation performance growing from 1.7 billion us dollars to 2.5 billion us dollars. So we're always looking at creating commercial outcomes for our clients and in the research and insight space, the work we did for this tech firm has very much done that.

22:30 From a digital experience perspective, we've worked with one of the major financial services names on this slide to transform digital experience through a complete website redesign that has spanned technological architecture, UX, UI, reusable component design, and also AI enabled enhancements to increase online conversion. And this has resulted in more than a 12 times increase in online conversion. and an increase of 170% in terms of online inquiries and form submissions. Again, creating commercial outcomes for our clients. Lastly, I'll just call out Execution Edge. For a leading healthcare brand, we provided a six-month bi-weekly breakthrough coaching programme to six of its senior executive leaders.

23:21 and this combined with executive 360 reviews, looks at sort of the human performance element of the execution of their transformation agenda, made sure that they could continue to establish themselves as one of the leading healthcare systems in the US. So it's important to note that it's not simply the number of clients we work with, but also the depth of the capabilities that we bring to them. We've included a few case studies, more deeper case studies of how we've been working with clients across different industries to call out a couple. These are non AI case studies, and I have a couple of AI case studies, but to call out a couple in terms of strategy development and commercial strategy development on the right hand side of this slide, we created a 74 million us dollar annual EBITDA uplift. which has been identified for 2030 by creating a commercial strategy that prioritized six growth platforms for this particular organization, including executable market specific playbooks, which redesign commercial coverage around customers and applications. So we're really delivering commercial results for our clients. That equates to a 51% cumulative EBITDA growth over four years.

24:40 From an AI perspective on the left hand side, we've been working with a global insurance brand to create an AI native motor insurance platform that has a 60% lower cost to serve. And it took us just six months to reimagine what an AI native motor insurance platform could look like for this global brand name insurance firm. Six months and a small team to take it from a concept to live regulated business where premium is now being placed through this platform. with 99% of processes completely automated, which is driving that lower cost to serve. On the right hand side, we've been doing work in ethanol production. So looking at fermentation yield losses and how we could help to save half a million to a million US dollars of margin in each quarter that this firm was losing because it wasn't able to identify yield loss early enough in the process.

25:34 By building a predictive AI model, we've managed to save this firm 640K to 1.3 million US dollars in just one of their sites in one quarter. So you can imagine the cost saving that that would create for this firm if we were to roll out that AI model across their multiple sites that they have. We also managed to achieve 96 predictive accuracy in a very short space of time. and the client is also now considering how they can use that proprietary model to help the wider industry to have better quality and to avoid yield loss. And why are we winning work in the market when it comes to AI? Well, a couple of reasons. One of them is that we have the in-house expertise and are also living the AI transformation ourselves.

26:25 We have created Elixir OS, which is our proprietary AI platform. When I spoke to you about a year ago, I told you about the agentic platforms that we were creating. We had a number of different agents that were stacked on top of our data layer and the orchestration of that data. that enabled us to grow our business and to deliver client work and we've now brought all of that together in elixir os elixir os helps us grow our business helps us deliver client work by primarily being human led so we have ensured that all of our teams senior and junior retain judgment client relationships and ownership of every output that elixir os gives them But the AI-powered side of Elixir OS is the agentic side, which completes repeatable delivery tasks and produces outputs for our consultants to review.

27:18 And that's the case for both growing our business and for delivering client work. So as a partner, I can come into work in the morning, I can switch on ElixirOS and it's already scanned the market for publicly available information of what's happening across my client base. It's scanned my personal network across that client base and it creates ideas for me to take to my clients to enrich the conversations I have with them and to generate and to develop business. It can even draft me emails to approach clients, whether they are new clients or existing contacts, to try and initiate those conversations about how we can support them. ElixirOS is also the platform we are now using to deliver client work and early results from 20 client examples are showing that we can deliver work faster, which enables us to have more time to give additional human value to our clients or to get to the next phase of work quicker. We're also saving time on administrative tasks and as Graham said, we've now managed to automate 73% of repeatable project delivery tasks such as project reporting and project management work.

28:27 And we're also finding that we can deliver work eight times faster when it comes to matching client records in this particular case, where client records could be processed in half a day versus four days manually. So the use of the platform is not just to grow our business and for business development, but also to deliver client work so that we can then add additional value to clients using AI. And this OS is reinforcing our ability to go to markets and capture the types of case studies that I talked about earlier. because our clients see that we're using AI within our own organization. We have the expertise. We are chasing the commercial value that it can create for them rather than just creating experimental pilots. And that is what has driven our AI revenue up 185% in H126. I'm now going to hand back over to Graham, who's going to talk to you about M&A.

29:20 Thank you, Emma. We remain committed to our programmatic M&A strategy. If you remember what that means or if you haven't heard because it's your first attendance, we're looking at one or two acquisitions a year that's going to increase our enterprise value by 10, 15, 20%. That's a better strategy, we think, and the research shows, than doing lots of small deals and also a better strategy than doing one gigantic deal. And we've used, you can see on the right-hand side there, We've used it to great success so far, having done nine acquisitions. You can see also how diligently we take it with those numbers. Since we IPO'd in 2020, we've screened nearly 6,000 businesses, engaged nearly 1,000, and met 300. I think I've personally met probably, I don't know, 250 of them. We are focusing on quality.

30:19 We're focusing on you know board level capability and we're focusing on businesses that have great clients and if I think about the three lenses we look at we look at industry so how can they get us into new industries or deeper into industries we're already in we look at geography and you can see on the right hand side actually five of those from ILAP through to TRC where the US That was a deliberate strategy from our side. The US is the biggest consulting market. We've been growing nicely organically there, but we can also speed that up inorganically. Just to tell you the kind of scale of the US consulting market for every dollar spent in Asia, $2 is UK, Europe, and $4 is spent in the US. So it is a market that we should be focusing on and we are focusing. And now when you think about our physical footprint, we have a very good spread across the US from east to west, south and to the north of the USA as well.

31:23 The way we structure our deals in the bottom left is really important. So we are all big shareholders, we try and manage dilution, and we think about it very carefully. So we will look to structure a deal, a third cash, a third equity, and then a third equity or cash at our discretion over a three year period that they have to hit certain revenue EBITDA targets to achieve. If they do achieve those over the three year period, the kind of position we set them, it effectively means that they have to double their EBITDA in that period. So when you then at the end of year three, look backwards, the effective multiple is far less actually than multiple degree upfront because of the value that they've created.

32:08 And all of that flows through to the numbers on the bottom right, which we've kind of touched on. I think it's the clearest indication of success there is when we get cross-sell working like we have. There are hundreds, if not thousands of examples in the marketplace of an acquisition strategy where you think there's going to be good for sharing clients, but actually they just come in and operate as separate businesses. And then you end up looking at the bottom line to try and find value. you know for us it's all about market it's about revenue it's about shared rate cards it's about creating extra ebitda at that level creating the market rather than really you know looking at where we can save one or two heads in the back office and that has been working really well and since pre-ipo you know we've always had a two pillar um sorry i've got a four pillar growth strategy but two major areas of growth one being organic one being inorganic we've always said you know 10 to 20 percent in each bucket some years some halves might be five percent and 15 or 20 or 25 percent or even 30 percent and you know on average we're looking at that 10 to 20 percent growth in both sides so that brings us to a kind of a bit of a summary of an outlook momentum is strong as we said the record first half revenue is 25 percent up EBITDA 31% gold clients have massively increased.

33:39 We're seeing a big increase in AI and tech demand. AI revenue up 185%. We're using it internally and externally as Emma's taking you through. And really that $200 billion market opportunity is something we're looking forward to getting as deeply stuck into as we can. We are looking at capability offerings. Um, we are, like I said, with buying and building. So a good example here is, is buying capability from quadrant, but also building out execution edge and really taking that to market, which is, is working well. And that means from an outlook point of view, you know, we are, uh, we see multiple avenues for growth. Uh, and you'll see this morning that we've given, um, guidance that our total adjusted EBITDA for FI 26 will be in line with market expectations.

34:32 and revenue will be broadly in line. So we're pleased with H1. We're confident in our strategy and we're looking forward to seeing it continue to succeed going forward.