PaySauce Results Presentation - for the Year Ending 31 March 2025

recorded 2025 from good to sum. Uh we've got the uh FL results and the annual release have been released to the NZX this morning and um this investor presentation is available on the NZX and on it will be on our website today h for everybody to to see. So start with the disclaimer. Uh I will just remind everybody that um nothing in this presentation constitute legal, financial, tax, marital or other advice. So please take that as as read and we will kick in with the results. So today we're going to have our CEO and co-founder Asant and he's going to talk us through the um the intro and the the strategy and then myself Jimmy Mon CFO and I'm going to talk to the financial results. So we will kick into it. Thank you. Thanks Jamie. Um, look, it's it's been a it's been a busy year and it's been a pleasing year uh for us. Uh, we've continued to grow uh both in customer numbers and you can see that's evident in the increase in processing fees which is up 18% for the year. Uh we've also been continuingly focused on the financial discipline as a business and that's reflected in the EBID number of 1.4 million which is up 27% yearonear. Um and in the end we're in the business of building a sustainable revenue stream and that's reflected in the customer lifetime value which is now sitting at 55 million which is up 28% yearonear. That's that's the asset that we're creating with the work that we're doing. Um and we and with that despite the significant investments we continue to make in research and development which I'll talk about uh a bit later on we've managed to generate f $518,000 of free cash flow. So so from a highlights point of view you know we've maintained profitability and substantially increased the free cash flow. We've accelerated the customer growth. Um so we've signed up more new customers in the last financial year compared to the previous. Um again that's as a result of concentrated work going into building that sales channel and fine-tuning the offering and also supporting that for the first time with some brand work that we did. Um and we've increased the value of our existing customer base as a result of that. So that's the the the highlight stuff. Um, looking at the the delivering on our strategy, a a key reflection of what we do is about the relationship we have with our customers and and that's what we call loving our customers. And that's reflected back to us in in the really high customer satisfaction numbers that you can see. Um, and our ability for us to respond to a customer inquiry. It's one of the areas that we work really hard on. We got a lot of criticism as in our busy periods that there was delays in getting back. We addressing all of that and and we're doing that in a more efficient manner and and you can see that coming through in the churn staying at or below the previous year's numbers and the cost to serve continuing to drift down. So we're doing more with less but not compromising on the customer care that we're delivering which is really important. The the second piece which is around growth um we we want to be known as a growth company. Um and and that's really at the heart of of what we are about. Um and we've seen that things like increasing our awareness translating into increased sales numbers. um the relationships that we are building with accounting firms and other partners resulting in a higher referral flow and one of the one of the things that we've been working really hard on which we'll deliver in in the coming months is a new website. Uh again it's about taking the learnings of the last 10 years and and saying look how how can we do better and how can we grow faster. Um, one of the important pieces to remember is that currently the main focus has been around New Zealand and it's about while being in New Zealand, while being in this nice cozy environment where we are well known, how can we build for scale? How can we build a multi-jurisdictional payload solution that we can take to any country we choose to and sign up tens of thousands of customers and not break apart? That's a really important part of our thinking and that's where some of the investment has been. So how do we build a scalable business that take that can take us 10x 100x from where we are today and and and that is um again these are not easy things to do. The these are hard things to do. Um and and again I'll cover some of these things in more detail as we get to the strategy down the road. I'll let Jimmy take over now again and talk about the numbers the last 12 months and and some of the insights that that you thank you. Um so again we we published our results this morning. Um the key highlight numbers are on the screen for you. Um the net profit after tax does include some deferred tax asset adjustments. So we do have some um some credits coming into that. So I'm going to talk mainly to the net profit before tax. And you can see on that slide there that we have um increased that from 190,000 to 460,000 before tax. Um and that profitability extends on from last year's profitability. So we did announce our maiden net profit last year and we've continued to to operate at a a profitable level which we continue to to do and intend to continue to do it as well. Um some of the key highlights on this slide um we are looking at um our key measures are um obviously our recurring revenue. Um the recurring revenue is made up of the two things. The processing fees that we earn from our customers as well as the interest income that we earn on that the float of funds that we hold on on behalf of our customers and that that float continues to increase as the customer numbers increase. So those customer numbers coming through really benefit that revenue side not just from the subscription revenue they get but from the interest income that we earn on that that revenue as well on that fund as well. Um key to that then looking at the year-on-year comparisons um you can see that the processing fees have increased 18% yearonear those are the funds that we've earned from those customers in the period um and interest income has been a more modest increase at 6% so those interest rates at the tail end of of the current previous financial year they dropped off quite quickly um and the impact of that was was banked into to the interest income that we earned um a lot of that um those declining interest rates had been um priced into the market. Um so the the fixed term rates that we got for the term deposits had already been factored in into those costs. The other one as Sam alluded to earlier on is that gross margin. Um so you can see there overall the recurring income recurring revenue has gone up 14%. Our gross margin has gone up 15%. So we'll go into the metrics behind this in a bit more detail shortly, but just shining a light on the fact that those operational efficiencies are coming through in that gross margin and we have increased that gross margin percentage by one percentage point from 77 to 78%. Okay, going into looking at it a bit more um over time. Um our profitability there, we've looked at it um you know last year as I said we made our median net profit our we've extended that a little bit this year um the cash flow is very closely aligned with our profitability. So just over half a million dollars of free cash flow. One of the key things for us is that that free cash flow was used to settle um a $650,000 debt that we had with BNZ. Um and that's, you know, we're now debt free, which is a really solid position to come in. We've been looking for self-sufficiency from a cash perspective. We have to ensure that we've got a little bit of buffer there. Secured a $350,000 overdraft facility with B&Z, which we've not yet had the need to use, but is there should we need it going forward. Okay. Um, so going into a bit more detail on the revenue growth, you can see that revenue growth over time and one of the key splits there is the processing fees and the interest income. Um, so key measures here is that the processing fee growth has remained fairly consistent. So that increase in the funds coming directly from our customers has increased over time. You can see the interest income relative to the the total income has reduced this year. So we've managed to increase the interest income that we've had in dollar terms but in relative terms in terms of contribution to our total revenue it has decreased slightly. Um going into the the more micrometrics then um in terms of uh the key investment that we've made. So Sand spoke to earlier on but one of the key things we've done is we've invested further into our sales and marketing capability and we've taken that historically we've been focused on investing on um part of the marketing funnel that gets that direct attribution. We've lifted that up the marketing funnel. So you know if you think about it from a a brand awareness and awareness the interest the desire and the action there's four stages of the marketing funnel. we've moved that investment up which means investing in brand awareness above the line um to help more people know who we are and what we do and the attribution on that for the marketers in the room is more difficult to attribute and it also takes a bit longer to see the benefit those coming through but that's a key contributor to those customer acquisitions costs increasing this year as we have started that brand awareness investment cost up by 34% yearonear that said it has been effective in terms of driving new customers. So a lot of the features that we've done, it's not one thing that contributes to the the new customer growth coming in. There's a lot of different components, but in this component, we are talking about the acquisition cost. So as a SA said earlier on, we've now acquired 1355, which is up on the number of new customers that we acquired last year. Now that cost to acquire them has gone up as well as a result of those acquisition costs coming through, including that brand awareness investment. So, our customer acquisition cost is now up at $584. Uh, and when we get to um at the bottom right of that slide, you can see that the the long-term value to cap ratio um is 12 to1. So, what that means is for every dollar that we spend on acquiring customer, we get $12 of value back from that customer. So, it's a very very efficient um measure and it's a common SAS measure that we use to to measure the effectiveness of the customers. Um looking at the recurring revenue then you can see there um you know the total ARR has um has increased year on year it's gone up six% from the annualized recurring revenue up 14% year on year so the annualized recurring revenue remember takes the position as at the end of March the end of the financial year and extrapolates that out by 12 months a key component of that is the RP the average revenue per user so on a monthly basis that's gone that's actually declined from $91 1 last year to $86 this year. Now, to break that split down into the processing fees and interest income, that equates to this year, it's $66 of processing fees and $20 of interest income. So, the equivalent numbers last year were $65 of processing fees and $26 of interest income. So, the the the amount of interest income per customer has actually reduced $6. um year on year and that's the key driver for that um that ARPU number coming down. From an overall business efficiency perspective, we've increased our headcount overall by two uh which has given us an increased revenue per FTE of $187,000. Looking at the cost to serve then um you know a key element within that is the you know that headcount none of those additional headcount went into our customer support team and the technical efficiencies that we've built in have meant that we have been able to maintain our customer support team at the level that they were at with technical efficiencies ensuring that we can handle the increased um increased number of customers are maintaining that level of calls and you can see that reflected in the bottom left there for the cost to serve per customer has reduced from $21 to $19 per month. Um so doing a reduction in that cost to serve those customers overall. Uh I'll talk a bit more about the customer lifetime value on the next slide in pictures. Um so this really is um for those of you who have been to this presentation before, you'll you'll be familiar with this this slide. Um this really is how we think about our business and how we measure our business and how we think about what we're actually providing to to our um to our customers. So the customer comes to pay us we pay on average $584 to acquire them. Um so that cost as I said before has increased um 15% yearon year. We then received the the gener that generated the revenue from those customers um being the $86 as I said before being the processing fees and the interest coming through. We pay an amount of $19 to serve those customers. This is per customer per month. So $19 cost gives us a margin that we make. H and then we look at our turn rates. So our turn rates are how many customers leave us in any given month. And we look at that in percentage terms. um in the current financial reporting period that turn rate has dropped to less than 1% just under 1% there. So when you invert that it gives you an implied customer lifetime value of just over eight years. So um when you put all those metrics together, it means that each customer is worth $6,747 to us h and you multiply that by the number of customers and that mean that gives an approximate value of our existing customer book of 55.3 million which is our total customer lifetime value that we we talk about. Um now without leading the witness too much when you compare that to our market capitalization uh our current market capitalization this morning was just under $23 million. So again the existing customer book you know is using the standard SAS metrics which is not a perfect measure but it is an indication of what our current customer is worth is up at 55.3 million. Okay. Um so one of the key things that we look at then is you know we spoke about the investment in increased investment going into our acquisition costs. So the sales and the marketing function has been a key investment that we've made. The other key investment we've made is into our product and development teams ensuring that we focus on delivering a stronger product um for the business and you can see in the graph there the investment has consistently increased. It's been a key focus area in terms of where we put the additional um revenue that we're generating from the business back into the business. And I'll I'll pass you back to Asansa to talk a bit more about that. Cool. Thanks Amy. Um just a couple of things just going through. Um it's really important to to to pay attention to a couple of numbers. So we've increased our revenue per FTE from 168,000 to $187,000. And that number has continued to hurt, which is again a clear indication of us doing more with less but not compromising on the customer care service. um on the CAC um on the the cost to acquire customers while you know we've spent a little bit more than what we spent the previous year we are buying a customer for seven months of revenue I'm incredibly proud of that that is a result of a lot of hard work and I know that that is significantly better than a lot of the SAS metrics that you see in terms of time of revenue taken to acquire a customer at at 7 months puts us right at the top of that curve. Um so just looking deeper into the numbers in in in in round numbers over the last two years we've invest invested over five $5 million in the R&D side. So we're building an asset. So why are we doing that? One of the learnings after being in this sector for 25 years is that one of the failings of the leadership of payroll companies is that they stay with the same payroll engine or the payroll solution for the lifetime that they're in business. And that means that you continue to incur technology debt and and it becomes harder and harder and the repayments of that technology debt become harder on the business which leaves very little room to innovate. We do not want to fall into that trap. We want to take the learnings that we've got and invest in today's technology. We started this business 10 years ago which means that some of the technology we're using is now 10 years old. We're replacing that. We're we're we're transforming our business, but we're doing that at the same time as supporting the eight and a half thousand customers we've already got. So we, you know, that's a a significant challenge and and I vividly remember Rod Drury talking about the migration of zero uh where they went from Rackspace to the AWS cloud. He talked about rebuilding the plane while being there. That's exactly what we're doing. We've gone through that migration phase of going onto the AWS cloud very successfully where all our solutions are running now, but also we're completely rebuilding the technology stack. Um, and you've seen in the last year we've built the a brand new Gen 2 payroll engine. These are the assets that we are creating that will give us the firepower to get out of New Zealand to build a much stronger global business and and and that takes time that takes effort. Um you know there have been times dealing with you know older technology and you know we hear of expressions of sting sticking lipstick on the pig. We don't want to be doing that. we we want to start all over again which is what we've done from uh taking the learnings that we've we've got over time and then using that as an advantage. So you know in in the last 10 years we have AI now it it's taking all of those technologies and saying look what can we use now that will enable us to do the next 10 years better. Um and while doing that we're doing we're responsible for over $2 billion of payroll each year. Now we're responsible for 75,000 employees who depending who depend on us to get their pay packet to them to pay their bills to look after their families. So we take that responsibility very seriously. It is balancing the existing business that is feeding and funding us but building for the future to go where we want to go because our ambition has not been to be a small regional rural focused payroll company. So that's that's a really really important piece to to understand in terms of where your money's gone over the last two years and and that is gone to build something that will enable us over the coming years to see really good results u in terms of customer growth. Um, so in terms of looking at the customer numbers, we've we've seen the pleasing part of last year is that we've increase customer numbers faster than we've done in the previous year as a result of investment. So, and we're doing this in a New Zealand market that is going through some of the toughest times. When I talk to small businesses out there, they're doing it really, really hard. and and and you know if you are in New Zealand you will know that it is not the best and the brightest time at the moment. It is a challenging economic climate. You've never heard us put that as an excuse as to why we haven't grown faster. Despite those tough conditions, we've grown really well and I'm really pleased with that. So the other piece is that every time we add on a thousand customers, we're taking that form a potential pool of 100,000 customers. So the pool that we can acquire customers is the same. Our share continues to improve. But so as a percentage our growth rate looks like it's going backwards. It's not. So it's it is understanding the the the as our customer base increases and we continue to grow our numbers. We then come at the question of saying where are we going to find new growth and and and that is a question that is occupying us as a board us as a management team of saying look where do we find the growth if it's not here where is it and and and what can we do to access that and and that is that is the point where we are in the business and we're looking at how do we use the new technology we've built how do we use the 14 different jurisdictions that we are already in and how can we leverage that to see us drive up growth again in in the coming quarters and in the coming years. Um the the advantage we have is we're doing this off an incredibly solid platform. We came to shareholders once in 2020 for money. We've not come back again. We've repaid debt. We've done this within the envelope of cash we have. So we've demonstrated to you that we are extraordinary good stewards of money and and and that enables us then to build a business. So when we require if and when we require additional capital, we can demonstrate a strong track record of what we've done. We've got lenders prepared to lend money to us and and it's a question of where do we use that? What's the best use of it? And and that's some of the things that that that we're looking at and and going forward. So that very quickly is um the the gives you an idea of where we are in terms of the year that's gone and the year to come is a a really important point in our evolution. Um and I'm really excited along with the team um as as we look at the opportunity ahead of us. It is hard not to get excited. It is it is like form a strong point. It's we're not a startup. We are an established company with strong cash flows, with strong loyal customer bases, which allows us now to step out and be brave and go after the market opportunity that exists in New Zealand and beyond. With that, I will I will take I think we'll go into questions now. Yeah. So, thank you to those of you who have sent questions through in advance. Uh we have got Todd on the line who's curating those questions and hopefully Todd if there's questions you're you're there to ask us. Thanks Jamie. Yes we've got a couple of questions here. The first one is from Zen Chen. Do you have any comments regarding your share price which has dropped by one/ird from its six month high. Zen um I I know you've been a shareholder for a long time and you've been very patient. I I'm really grateful for that. Um, look, none of us enjoy seeing the the share price at where it is. Um, and the copout answer from a lot of uh CES is to say, look, I don't control that, so I can't do anything about that. But we do have some influence on that and and and we got to put our hand up and say is maybe we haven't told our story the way it needs to be told in a way that the market understands exactly who we are and and what the opportunity ahead of us is. Um, currently they're being judged as a small regional New Zealand focused payroll business with a limited market with a limited total addressable market and and because of that we are worth whatever the the market says it is. and and it is up to us if you disagree with that to say why we should be differently valued and and and and part of that is our responsibility and and that's something that we're working on is saying look we probably need to explain ourselves better in terms of where do we see ourselves going um from today and and what have we built which is why I've taken the time to explain where the $5 million of investment has gone we have we have not seen the results of that investment as yet. We are really confident as a management team that we will. I hope that answers your your question. Ma, I I I I hear this. You're not alone in asking this question. Um and and and and people see and judge us as I said a New Zealand based payroll company that's just chugging along doing modest growth of 10 15%. Um and that's what the that's what the numbers say, right? and and and and that is that is where we are and and we're really cognizant of it and and I think um as again as a board and as a management team we'll be working harder in being more explicit and clearer in terms of our direction and what the size of those opportunities are. They are significant. Thank you. There's a related question here through from Rob Woodward. uh with the performance of the share price being heavily impacted by amongst other things low liquidity small parcel trading through the Sherzy's platform uh can the directors outline the pros and cons of being listed and what consideration they have had to take the company private again or get better analyst coverage. Yeah, I think I sort of answered that in the in the first part. Rob again, you know, a longtime patient shareholder who came in on a seed round. Um, look, it's it is something that we're really cognizant of. Um, and and and it is about um the the New Zealand capital markets is is what's what's the best way of saying this? It is it is it has got inherent weaknesses for businesses like ours that has got significant potential but currently is that is viewed as a micro cap which means that we get no analyst coverage. Nobody really cares about us. In order to get to that we need to get to 100 million. In order to get to 100 million we need coverage. So what how how do we achieve that and how how do we get that balance? It is really difficult to get attention as the kind of business we are with the opportunity we have with the performance today. It is you look look at the numbers now and say look how can we change that to answer your question about take private it is there have been a number of discussions we've had at board level what our options are and obviously that is one option um if the public markets are refusing to recognize our value that is a part we can take but no decisions have been made on that front um like all things it's an ongoing uh discussion we have is to say being listed as a public company is that the best place for us at this point in time the decision is yes. Thank you. Uh it's another question here through from Zen. Uh as a software company, have you embedded the latest AI technology such as DeepS into your product? If not yet, why? It's it's a really really interesting question. AI is here. AI is real. We take it really really seriously. We're not ignoring it. We're using AI in a number of areas of the business. The balancing point is, as I said before, 75,000 employees rely on us to safeguard their confidential private information that is incredibly valuable to them. We take that responsibility really seriously. We're responsible for paying around $200 million of payroll each month. and and and we when you take that the chance for us to stuff up has got to be close as possible to zero. So in terms of using any new technology we put that at the forefront and and we're currently working on a framework uh a process of education and training for our staff to understand that side. So that's on the you know how far do we go on the other side the the the easiest wins are being are being sought now and they're being taken now. So which is on the customerf facing side. So we've added in round numbers another 2,000 customers in the last two years. We've not increased the size of the customer support team. We've not done that by cutting back on customer care. We've increased customer care by using technologies like AI where we can anticipate and answer questions better, faster, and more efficiently rather than tying up a human. The the idea is we use the human where only a human can deal and solve that problem. So we're using AI in that um we are a Salesforce um user and Salesforce is one of the pioneers around AI on that customer care side of things. So that's an area that we are deeply invested in. Um you know there's there's some great examples of where the AI technology can be really really beneficial. A a great story on that is two weeks ago we were able to build a prototype of a brand new payload solution of what that would look like and we did that in a matter of days. something that would have taken we used a solution called lovable and something that would have taken you know six 8 10 weeks and tied up a couple of our dev time we did that in 48 hours that's the power of AI and I'm able to now take that prototype and show that to customers and say is this what you're looking for and they will say I want this feature I can come back put that feature in go back the next day that kind of rapid prototyping AI is brilliant for it. We love it. So, so we're using AI in a number of very specific areas, but you know, it is it is it is something that we are really cognizant of and and and we are very much on board of and we're not ignoring. Thank you, Samantha. There's another question here coming through from Matthew Chen. Uh are you still sponsoring sports teams? Yes, we are. We we're currently sponsoring the the Wellington Lions and the the Tarani goals. Um we we'll continue to do that. Our strength has always been in in some of them as grassroots. That's who our customers are. The these are ordinary people doing ordinary things, taking their kids to the rugby and that's the place that we want to be seen. It's been a a really good partnership for us and we will continue on that track. Um because that's a place where our customers, people, hardworking business owners running the the kinds of businesses that we support with three, four, five employees, those are things and and areas that they go to and and we will continue doing that. We're not backing off on that. We'll continue to increase some of those things if at all rather than reduce Thank you. Another question here through from Rob McIntyre. What are your international ambitions and do you think you can self-fund it or do you foresee the need to raise significant external funding in the next few years to service the growth? I answer that question. It's really important to understand the founding of this business. We we started this business not to be a New Zealand based payroll company. I'd already done that. That's something that you know I very successfully done and a business that I sold um to Darac. The ambition from day one was to be a global business and and and that ambition is as strong today as it was on the day of founding. We believe that we have the opportunity to become the micro business payroll globally. I'm really inspired what Rod's done around accounting. There's no reason why we can't do the same for payroll. The the opportunities are significant. Um, for some interesting reason, New Zealand leads the world in a lot of technology related around payroll, which is fantastic, which means that we can incubate ideas and then we can learn from that before we go to markets that are probably a couple of steps behind in the evolution of payroll. So, the answer to that question is a definite yes. Um because we we we're not interested in being just a New Zealand focused battle company. Thanks Samantha. A question here through from Mike Mai. New Zealand is a small market. You've looked at Australia in the past. Jamie, you were over there two years ago. Why is the offshore growth not being seriously targeted? Yeah. to in order to target the growth, you need to have the solution to get there. And and and and that's what we've spent the the last 24 months and and and the $5 million on is building that payroll engine using the knowledge we have. We've we've we've been spending a lot of time in Australia in understanding what the requirement is and and being 100% certain as you can possibly be as to what the product needs to be, what the market is, what is the path for the market and and that's work that we've continued to do. Thanks. Question here from Rob Woodward. Uh, if you've spent $5 million in rebuilding the payroll engine in the last year or so, what level of capex do you see over the next two years if you now have a new engine? Acknowledging your comment on technical debt in the the work is predominantly done. A lot of the work happening now is around the front end. Um, sorry, I'm missing I'll go back with the previous question. There was a question in terms of requiring capital at you know again at this point we are not looking for new capital. Um whether that will change as we see new opportunities and we require capital to do that that that is a question that we will deal with at that at that point. At this point in time, we've been able to self-fund predominantly all of the hard work required in building that platform, which as we proved in the proof of concept delivery early on in the middle of last year, that's where we used that payroll engine for the first time. So that is pretty much working. What we need to now build is the front end and and some of the connections and the integrations that go with it is what needs to be built. So again, we are confident that we can do it within the the existing cash flows that that we're generating by the business. Awesome. Thank you, Samantha. Uh no further questions have come through this stage. All clear. Thank you. Um thank you for for all of those who participated. uh really appreciate your interest in our business. Um it is a it is an exciting time um and it is a a time of opportunity for this business. Um which we intend to seize with with both hands. Uh we've prepared for 10 years. Um we've done the hard work. Um it it is now converting that to to runs on the board which is what you will judge us on. Thank you so much. Um and and have an awesome day.