Checkit (LSE:CKT) — Preliminary Results

0:00 Good afternoon, and welcome to the CHECKIT PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Simply type in your questions and press send. The company may not be in a position to answer every question or receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it is appropriate to do so. Before we begin, I would

0:31 like to submit the following poll. And I would now like to hand you over to CEO, Kit Kite. Good afternoon to you. Good afternoon. And, actually, also, good morning because I'm speaking to you from The US, and so good morning to everyone who's joining us from The US as well. There's a bit of a presentation of the team I'll give you at the start here. So also introducing David Davis as our chief product officer to the to the normal group of myself and Greg Price. That's specifically so we can talk a bit more about the recent product module that we've launched, and he'll go into more details as we go into it. Okay. So there's a tight agenda that we wanna get through today. We'll start off with the operational highlights. And then for those of the new to this to the story, I'll take us through who CHECKIT is and what makes us differentiated.

1:22 Then I will cover off how we're progressing against our stated strategy and key goals before handing over to David, and we'll do that deep dive on asset intelligence. And then Greg will take us through the financials, and we'll open up for questions. Okay. So we're we're really pleased with the results that we delivered for f y twenty four. Our stated goals are consistent growth and and accelerated path to profitability coming through. So 16% growth in ARR to 13,300,000, 17% growth in revenue, whilst at the same time, we've now delivered 30% CAGR in our recurring revenue growth since f y twenty. And we've half losses in the year to 3,400,000 down from 6.4. So we're really pleased with achieving those twin goals at the same time.

2:07 Gross margin at the same time has continued to grow four percentage points to 67%. And our land and expand strategy, the way that we grow our customers with initial entry point deals and then expand over time continues to be validated as we deliver a net retention rate of a 111%. As I mentioned, we recently announced the launch of asset intelligence, which is a very exciting, data led play that David will take you through shortly. And we delivered cash of 9,000,000 at the end of the year, so we're clearly on path to deliver profitability in f y twenty seven EBITDA positivity as the guidance now states. Okay. So let's have a look at who CHECKIT is for those that are new. So to keep it very simple, CHECKIT is a technology platform that delivers automation and digital the deskless worker. The deskless worker is someone who works for large blue chip enterprises at about 80% of the global workforce.

3:09 These are these are large multisite international organizations. Where CHECKIT delivers its value is, roughly speaking, in four areas. So from a senior operational leadership and management perspective, we are giving them visibility into how better to run their operations using the deskless worker, which is the majority of their workforce, and indeed, the interaction they have with their fixed assets and their built environments as they go about their work. So that is the format takes the format of dashboards, insights, analytics that they can then drive cost efficiencies and productivity gains across the the organization. That information, that data is powered by the two aspects that make CHECKIT unique and differentiated. First of all, a IoT Internet of Things ecosystem that acts rather like an extended nervous system across the organization, monitoring fixed assets in real time. This is providing immediate warning of issues and prompting and guiding actions that the humans, the DESUS workers can then act upon in real time prevent things like stop loss or compliance failures.

4:17 At the same time, the human and the DESUS worker is equipped with the CHECKIT digital tool, our workflow management capability that is device agnostic that takes them from an analog paper based Excel spreadsheet based world into a real time digital world that translates all of their tasks into a very user friendly format, allows them to get on with their work. All of this activity is generating billions and billions of data points. And so as David will take you through later on, what we're then building is machine learning and AI algorithms to capitalize on the data that's already being generated to further enhance operational management capabilities.

5:04 So for those that are new to the story, I'll I'll talk you through why you should consider investing in CHECKIT. One thing I want to point out, and it's something that's become really clear as I speak with US investors, is that people get very excited about the size and the scope of what's called the smart center market. So just Internet of Things alone. This is a this is an industry that's growing at 18% CAGR at the moment, and CHECKIT is very well positioned as a leading integrator of Internet of Things capabilities into solution sets for customers. At the same time, we have around about 350 what we call sticky customers, large blue chip enterprises, whom, as I demonstrated through the NRR of a 111%, we continue to grow and land and expand over time. These customers typically come with a lifetime value of around about eight years. So once we land them, they stick with us for quite a time as we look to scale them over the period.

6:02 At the same time, we're very focused around where we want to play and where we want to grow. So for example, I'm in The US because The US is one of our stated growth markets and geographies. We see this as a great opportunity for the company given the commonality of blue chip customers as we have in Western Europe, where there's just more of them. We see a great a great opportunity to expand. As I mentioned earlier, we continue to focus on recurring revenues. So whilst our ARR is growing at a CAGR of 30% recurring revenues overall and now 93% of the entire revenue base for the company. So this translates into a quite significant market opportunity. Okay. Again, as a reminder, we're we're dealing with 80% of the global workforce spread across large blue chip enterprises in a very specific set of industries that we we want to we want to target.

6:58 So

7:05 the I'll take us through the aspects of our strategy that we're focusing on. On on the top line, we're gonna talk about growth. Growth being where we're looking to accelerate US market presence, how we're looking to scale, upsell, and cross sell existing customers, and then where we're looking to focus in terms of our industry verticals and the adjacent verticals we're looking to bring on onboard. On the bottom line, we're talking about the profitability metrics that help drive the the business forwards to breakeven. So, for example, the recurring revenue subscription focus is now 93 of all revenues, continual focus on driving operating efficiency into the business in order to expedite profitability, and at the same time, sequencing investment towards innovation and r o d to release things such as asset intelligence to help the business continue to grow.

7:56 So let's consider how we're faring against that strategy. We talked about The US. From a standing start, The US is now 3,400,000 of ARR, over the last three years. That's about 26% of the group's total ARR. So we're really happy with the footprint that we've established. US is obviously notoriously hard market, and, you know, many UK companies struggle to get a decent footprint in there. So we're pleased with our potential so far. As I as I mentioned, it's a huge market opportunity for CHECKIT. We've invested in scaling up The US leadership from a sales perspective and a marketing perspective. And, you know, it's fair to say that we expect That US to be a leading contributor of ARR to the business on an annual basis within the next two to three years.

8:44 When I consider the verticals that we play in, CHECKIT PERONLY plays in the health care, food retail, and hospitality verticals. So health care represents now about 50% of our ARR with retail being about 30% and hospitality about 20%. To give you an indication, what we're seeing at the moment, where everyone's aware of the macroeconomic challenges that that face the market generally, health care continues to be robust from a pipeline and a sales perspective. And I I think this is linked to the fact that

9:14 it's a higher margin industry. We have a very well developed set of use cases and a well developed client base, so we continue to see robustness in the way that those those deals in that pipeline's managed. What's also interesting to note is that both retail and hospitality have started to show signs of life certainly this year in terms of our pipeline, in terms of the new opportunities that are coming in, which is great given the last two years where they've they've struggled a bit. We also are now bringing in adjacent markets and and industry verticals for us to focus in. So for example, food manufacturing and biotech are natural fits given the products that we have and the use cases we have with the domain experience they bring to bear. As I mentioned, recurring revenues is now 93% of our total revenue base, so we consider this aspect of the strategy complete.

10:03 That that which is not recurring revenue, so not the nonrecurring revenue bit, is effectively professional services associated with integration and implementation of the CHECKIT platform into the system. We talk about the path to profitability. And as I said, we've halved losses to the year to 3,400,000. I think what this is also demonstrating is the impact of operational gearing coming through as we keep our operating expenses relatively flat from our cash position. And as the guidance would now suggest, we'll be very confident about hitting EBITDA positivity during FY '27, which is effectively the end of calendar year '26, so just over two years' time. Now we we've often talked about some of our core large customers, the likes of BP or Waitrose John Lewis or BNHS.

10:52 So I thought I'd pre briefly mention a couple of our medium sized customers to to highlight again the breadth of customer that CHECKIT has and indeed the opportunity we we run with them. So for example, if we consider Kedrian Biopharma in The US, the biopharma blood plasma market in The US for us is very interesting. Yeah. We actually have six out of the top 10 blood plasma biopharma providers in The US. I think it's fair to say that we're actually the leading provider of blood plasma biopharma services to The US market of any customer. So for example, ked Kedrian, we have 70 different centers in The US where CHECKIT is providing automated monitoring solution. This is giving them not just instant information around the state of their asset base, given that effectively these are mission critical operations for the business. But at the same time, what we're also doing is providing an audit and compliance trail for what is a very heavily regulated industry, and we're minimizing the likelihood of risk to the business and indeed waste of the product.

11:52 A completely different example, a completely different story would be P and O ferries, for example, where we've re where where we recently sold the CHECKIT platform, a different product set. This is the workflow management platform, a different form of IoT, into their two new leading flagship vessels. This is to provide them with a digital first, automation first, effective food operation solution because this is hospitality on the water. And, again, this takes them from an analog paper based world into a digital world. It gives them an audit visibility and immediate effort. It also helps them reduce the the manual effort and indeed the labor cost effort that's required across these ships and contributes directly to sustainability goals.

12:40 With that, I'm actually gonna hand over to David to take us in more detail through the new asset entitlement product that we just released. Great. Thank you, Kit. So as as has been mentioned, I'd I'd like to take you through a first sight of what we've done with artificial intelligence and machine learning on top of all the data that we're collecting. And to put that into context, just to remind people and and perhaps explain where this all comes from, that the platform has these these three elements that that Kiss described, the Internet of Things sensors that help people, keep their stocks safe, that remove manual checks from from people's lives to free them up to do other things, and also ensures complete compliance monitoring. That that that's based on both our own sensors and increasingly third party sensors as well.

13:27 Working in tandem with a a workflow product that puts a very easy to use tools in the hands of workers to make sure that they do that they're able to do the right thing at the right place in the right time. And, crucially, those two working completely together from one from from one service provider, which is us, so that if something happens in the real world, people at the front line can respond to it in the right way, with the with the workflow. And, of course, this is used by, companies with you know, potentially many hundreds of locations where seeing what's going on across your business is is just not possible without this level of digitization. So our analytics products, provide that oversight to, you know that they have for some time allowed people to compare locations and trends. But what we've done now is bring on this new capability we we call asset intelligence, which is is taking we've taken another look at what we could do with that data and applied some new techniques to it.

14:24 And really, this comes also from not just, you know, what could we do with the with the technology, but what problems are our customers facing. And the people we're talking to who are owning, you know, potentially many thousands of assets, fridges, freezes, etcetera, containing very valuable stocks. The sort of questions that that that they ask, you know, beyond the basic monitoring is, how can I tell where I should focus my maintenance efforts? Which which of my assets are really healthy? Or which of my, you know, am I have I got things set up right so I'm not wasting energy? Obviously, we all know that that's increasingly important to people. Or how much of my capacity is available? As in, you know, I've built my operation whether it's a retail operation or, you know, a supply chain to to use the the the the assets I've invested in.

15:10 Well, how many of them are actually available at any one time? So so that that's what that those are the problems the product solves by basically taking this information we were gathering and and and treating it in a new way. So new value for customers, we think it sets us apart from the competition and also demonstrates our technological leadership, and it's a great opportunity to expand our footprint in line with the strategy Kit's been talking about. So what does that look like? Well, behind the scenes, the machine learning is essentially categorizing things into into, for for want of a better word, into different buckets. So this is an example of of of how we we start to look at the health of an asset, in this case, something, monitoring refrigeration.

15:56 And in this case, you can I think you can probably see on the screen, this is categorized as a as a good, a healthy asset, and the plot at the bottom shows essentially that the,

16:06 that the temperature is being controlled in a way that that that that falls well within the expected tolerance that the machine learning has has figured out is correct? And if you contrast that with a poorly behaving asset, you you can I think you can see the difference for yourselves? Now, of course, if you've had two frigid or freezer like this, it would be easy to go and look at what's going on. But you have to remember that these are these are businesses and operations teams who are managing many, many assets. And being able to sort them this way and figure out where to go and look and pay attention is hugely valuable. And we can apply similar techniques to looking at how much energy is being used or wasted. So, you know, it's it's a trade off. If you set things up, too too close to the the the limits, then you you risk you risk not keeping the contents of your of your fridge or freezer at the right temperature. But if you set it too low, you you you're essentially just burning money. So the tool is able to look at that balance and and identify where energy is being wasted, and then again recommend to the, operational teams,

17:09 what they can do about that to start actually reducing emissions while while keeping stocks safe. And finally, a similar approach can be taken with no configuration at all to work out which appliances are essentially in use or not in use across a large area.

17:28 And and as I as I mentioned before, this is particularly important in areas where, you know, these appliances are important to operations. As somebody said to us, you can't sell ice creams without an ice cream freezer, and that that's just one example. So huge amount of work's gone into this, but building on on the on the models we've on the data we've already collected. And think the key takeaway is that we've taken the value of our of our IoT from the very important tasks of looking after compliance, stop loss, and safety, and extrapolated that into a whole new area where we're helping people figure out where to target their maintenance. They can figure out which of their fleet of appliances they should be replacing and where their capital investment should be going with with a more scientific approach.

18:17 They can also address the so emissions problem. And in cases like my ice cream fridge, they can also target improved retail revenue, all from the data we've already already collecting. Thanks, David. Sorry. Over to you, Greg. Thanks, David. Our financial results this year are based on three drivers, sustainable growth, efficient delivery, and careful cost management. And on this highlight slide, you can see all of these drivers in play. So sustainable growth in that revenue was up 17% year on year, efficient delivery as gross margins have increased by four percentage points to 67%, and careful cost management as we've reduced losses by almost half with EBITDA now being £3,400,000 as we continue to progress towards profitability.

19:18 Sustainable growth while driving cost efficiencies is a delicate balance, and we'll take you through this as to how we're achieving shortly. But first, let me talk about revenue in a bit more detail. So total group revenue for the year was £12,000,000, which is up 17% versus last year. And recurring revenue is also up 17%, and that recurring revenue continues to be over 90% of the total, which demonstrates the quality of our revenues. Our growth reflects our land and expand strategy, where we start with a small sale to a customer and then progressively develop our footprint with them, which is seen in our retention rates at the bottom And gross retention of 99%, net retention of a 111% are certainly something that we're very pleased to see.

20:15 And those strong retention rates give us confidence in future revenues, which you can see on this slide. So our annual recurring revenues are a clear indicator of future recurring revenue. So if you look at f y twenty two in that second block, ARR of £9,000,000 in FY '22 converted in FY '23 to recurring revenue of £9,600,000, and then ARR in FY '23 of £11,500,000 converted into recurring revenue in FY '24 of

20:48 £11,200,000. So we we have good sight of our future revenues, and that gives us confidence in the guidance that's been issued today. But our top line growth is only one driver of our performance. So let's now talk about our margins. Gross margins have continued to increase from 54% in FY '22 to 63% last year and 67% this year. The improvement this year has come from utilizing third party providers in our delivery model as well as the full year effect of procurement savings for our platform costs. And on top of our margins, we've been able to harbor losses, as I was saying, and our EBITDA has improved by 46%.

21:35 And as you can see here, this is partly due to the increase in gross profit, which is up 23%. It's also driven by the reduction in operating costs by £1,500,000, 11%, as we carefully managed our cost base in the year. So our investments in sales and marketing reduced by 12% in the year as we focused on maximizing our ROI and identified opportunities in adjacent markets and geographies as Kit has mentioned.

22:05 Product cost expensed also reduced by 7% as a result of efficiencies achieved. Although the amount capitalized increased to 2,000,000 as we invested behind the capabilities that David has talked us through. Elsewhere, we've driven cost efficiencies in our operations, introducing automated call handling and offshoring as part of our customer support team in h two.

22:33 So all that means that when we look at our cash position, we can see sufficient scope to reach profitability. Cash at the end of the year at January 2024 was £9,000,000. And even though we saw a one off adverse working capital movements of £1,200,000, as we increased inventory levels to protect our supply chain, FY twenty four saw a 23% reduction versus the previous year in cash burn, and we expect this to continue to reduce in f y twenty five. We manage our cash very carefully so we can maintain the balance between achieving further top line growth and profitability. And you can see that balance on this next slide.

23:21 The combination of top line growth at the top and then the reduction of losses as we expand margins and continue to drive cost efficiency means we can be confident that we can achieve the analyst guidance issued

23:35 today to show a positive EBITDA in FY '27, which, just to remind you, is the year to January 2027, so effectively calendar year 2026. As Edison have said today, when we reach breakeven, operational leverage should support rapid margin expansion. So there's lots more to come. And on that note, I'll hand you back to Kit for more on our outlook.

24:02 Thanks, Greg. Yes. So we will continue with our land and expand strategy. I'm gonna capitalize on how we can monetize the date the vast amounts of data that's being generated by our platform with new and exciting product innovations. As I mentioned, The US market remains a key priority for our growth strategy over the coming years. And with our operational our prudent operational manage cost management, we we'll will maintain our momentum on margin improvements. Again, we look forward to being cash flow breakeven during FY '27 and posting positive EBITDA in FY '27. And therefore, we look forward to this year with confidence. That's great, Greg, David. Thank you very much indeed for your presentation. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the top right corner of your screen. While the company take a few moments to review those questions submitted today, I would like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard.

25:08 Okay, Greg, David, as you can see, we have received a number of questions throughout today's presentation. And Alex, if I may now hand back to you and kindly ask you to read out the questions, and I'll pick up from you at the end.

25:20 Thank you very much. Let's kick off then with the first question. Revenue growth is currently slower than historically. Can you share with us any metrics on the number of success in conversion of sales presentations over time, which may indicate whether sales cycles are still lengthening or contracting? Thanks, Alex. Let me let me take that. Look. So so the way we structure this business is we have what we call run rate forecasting, run rate sales, and large deal opportunities. That's the way we split this. We build our business around the run rate deals only. These can be short or small initial deal sizes, but oftentimes with large blue chip customers. Okay?

26:06 So whilst it may appear that revenue is slowing, it's not entirely true given that the the base overall is growing. But also the when we consider things like the NRR of a 100%, what it really means is that we're bringing in, let's say, an initial deal size with average deal size of, say, 20 k GBP, which for a customer, if it was like BP or similar, is one that we can grow to more than a million pounds of ARR over the coming two to three years. So, actually, we think about, are we getting the right type of customer into the pipe? Then flows through the following years. You see the NRR being top quartile compared to our peers. What I can also say is that when we look at comparable organizations and companies, it's the common sales conversion rate in the pipeline is around about 11%.

26:56 That's actually best in class, and that's what we see inside CHECKIT. So our conversion rate is where we need it, where we'd expect to have it, which means sales execution is where it needs to be. The the lumpiness in the pipeline is dictated by large deals. So given the current macroeconomic environment, they can sometimes move by a quarter or even six months. They can can indeed fall out of year. Hence, the reason we didn't forecast around it. But we're pretty confident, especially given the start to this year, in the types of organization that have entered the pipeline and the potential size and materiality of those deals. Got a couple more questions on the sales area. The difference between the net retention rate and the total revenue growth is quite small, suggesting modest success finding new customers.

27:44 What are you doing to address this? Thanks, Alex. Yeah. Let me let me pick on that again. Well, I think, actually, that's related to the same answer I just gave. So, again, remember, an average deal size for CHECKIT is around about 20 k. However, when you're bringing in large blue chip customers, the expectation, given that we have an average custom lifetime value of about eight years, that expectation is that over the next two, three years, you'd take that 20 and you'd take it to 100 k, 200 k, 300 k, etcetera of total ARR enterprise value for the customer. So, actually, the focus is very much on land and expand. We wouldn't want to have a primary focus that is contingent on landing large wells in year. Otherwise, we'd we'd struggle with our forecasting.

28:34 If a customer doesn't renew a contract, can you remove the installed sensor?

28:40 What's to stop the customer carrying on the tasks without your service? Great question. Very simple answer. The customers don't own the sensors we do. So if a customer doesn't renew the contract, we remove all of our equipment and hardware. So they can't they can't use they can't use our system without paying us money. But there's another interesting point to this, which is that I think when we looked at our GRRs, our gross revenue retention of 99%, so it's it's that's best in class. Very low churn rates. And I think part of that is because once you have got the IAC and you have got the system in place, you are providing mission critical operations. So it becomes quite a barrier to wanting to remove CHECKIT because you're reintroducing a lot of risk into your system. And so and so we see this, and we see we we often see even where a customer may indicate that they want to not renew a contract when it actually comes down to it. We've often seen extensions to that, and it gives us an opportunity to to revitalize a particular relationship if it needs doing.

29:47 Thank you, Kit. Moving on to a slightly different topic about product innovation. What is the market competitor to asset intelligence? Does an Internet of Things for fridges exists, or is the data collection platform novel? Yeah. I if I might ask David Davis to comment on that if I can. I I thought yes. Sorry. I nearly jumped in anyway. I mean, I think, first of all, yes, IoT off bridges exist, and that's why it's important for us to continue to innovate. I mean, the way the way we do the IoT piece is itself, you know, there's various differentiating things about it, including the way we sell it as a service, the service to be wrapped around it, things like calibration.

30:36 But and, of course, second differentiator is that it comes, as it were, out of the box with the workflow as I tried to explain earlier. So rather than just collecting data, we're also enabling you to do something about it. And but we're not seeing our our our competitors do doing the what I described earlier, which is actually taking that data and using techniques like machine learning to actually turn it into even more high value high high value information. So, you know, that is a differentiator on top of, you know, what, you know, what what what is a rapidly expanding I IoT sort of landscape. I I wanna add I'll add to that as well, and I'll just say that, again, if we focus on the desktop space, which is the opportunity here, we we don't see another competitor that's that's that's monetizing the data in the way that we we are.

31:30 And those twin pillars of IoT workflow that keep pushing data in give us a competitive advantage at the moment. Now when I speak to our customers, and I've been speaking to a lot of our existing customers and new customers in The US, This particular product innovation is something that they're actually asking me about before we've even had a chance to to advertise it to them. So this is top of mind for almost all of our customers at the moment, not just from an ESG perspective. From a cost management perspective, it's significant. And they're expecting the impact of AI to give them these types of benefits. So it's really reassuring, having now released this module, that we're kind of ahead of the curve in this respect. Staying on the topic of product innovation, how do you stay of technolog how do you stay ahead of technological advancements and ensure that your solutions remain innovative and competitive?

32:25 Yeah. Let me let me take this initially, and then I'll I'll pass on to David. I mean, I think I think the first of all, what we're constantly doing and and and David's function, which is which is a well funded function, is constantly scanning the environment for not just a competitive landscape, but trying to to bake in the latest innovations that are happening on a global basis and ask the question, what is it that we actually need to build versus what is it we need to copy and integrate it to something that is relevant for our customer base and our product set. And, increasingly, as we go forward, I think that's the opportunity for us. You know? The idea is not for us to try and become a market leader in, you know, large language models or some version of chat GPT, but it's instead to take all of the benefits of that and apply it to an area where we have domain knowledge and domain expertise.

33:18 And that area is the deskless worker in an environment that has built assets, people, and and fixed assets and and and heavily compliant goods. So, David, is there anything else you wanted to add to that? I mean, that's spot on. You know? It's it's very important that we you know, the way the modern world is, there's a lot of fantastic technology coming out that we can leverage, and it's, you know, it's important we do not try to recreate that. It's all about having, you know, a very smart team who can take that and shape it and and and coupling that to, I think, build yeah. Building on our strengths, we've already got things that make us difference. We've got vast reservoirs of data, which mean that we can apply that in a very distinct way. And then listen to our customers and making sure that what what we're doing isn't isn't for the sake of it. It's because it solves real real really practical solutions. And, you know, the the example you just gave of people asking about, well, you know, what else can I do with this data? How do I how do I predict what's gonna go wrong with my appliances is a great example, and that there will be more.

34:14 Thanks, David. Got another question here on sales. With the reduction in sales and marketing spend, how do you ensure that this reduction doesn't negatively impact future revenue growth, especially in the context of expanding to new markets and sectors? Thanks. Again, let me take this. It's a tightrope. We've got these two we've got two goals that must be achieved. One is consistent growth rates, another one is accelerated path to profitability. So what it's really doing is it's acting as a forcing function for us to very rigorously analyze the ROI and every pound that's being spent across the business. Okay? So as it relates to sales and marketing, we actually run a pretty efficient operation. So if you look at the total spend on sales and marketing, it was about 2,600,000 in the last year.

35:04 That's about 21% of our revenues, give or take. It's it's actually bottom quartile for a technology technology company of our size, and yet we're delivering above median growth rates. So we have a high level of efficiency in the spend that we put through sales and marketing. We would like to incrementally increase that investment as we get closer towards profitability, but also as we see green shoes presenting themselves. It isn't always the case that by putting pounds in today, you get immediate pounds out tomorrow within the context of life cycle. And so that's just something we have to balance. So So we're constantly looking for efficiency and effectiveness where we put spend. I don't see that a a reduction in sales and marketing over the last twelve months is materially gonna have an impact on our sort of mid to long term growth rates. If anything, we'll start to see that spend tick up over the next twelve to twenty four months.

35:57 Thank you, Kate. Next question here. At what point do debt providers recognize the rent type qualities of your revenues such that nondilutive debt finance may become available? I think I'm going to refer this question to Greg. Thanks, Kit. That's fine. So I think the short answer is that there are many different banks and financial institutions out there, and some of them will be more receptive to technology business like ourselves. So there are some banks that are more conservative who want to wait until we're profitable before they would lend us debt. But there are also a number of banks that would already be open to working with us on the basis of ARR financing. And I I talk to those range of banks regularly.

36:42 It's not something that we have onboard yet in our armory, but it's something that we're considering. And at the point that we think that debt financing will have a role to play, then we'll pursue it. Thank you, Greg. A more broader question here. Who are your who are your main competitors, and why would customers pick CHECKIT solution over the competition? Good. Yes. Again, this is a it's a fragmented industry. There there's no single big player, which is, again, part of the opportunity here with CHECKIT. I would I would signpost a couple of two or three different companies. I think over here in The US, you've got kind of VC backed companies like Zenput or Go Sport Chek or ReScientific, some of which are doing workflow, some of which are doing IoT.

37:33 Over here in in in in or over in The UK, I think you're looking at the likes of Reflexis or potentially a Crimson type, which is also aim listed, and you can have a look at their comparables with CHECKIT if if you like. I think why would someone choose CHECKIT over any of these types of player? What none of those competitors are offering actually is an integrated end to end solution. Not really. So we'll find that there are some there are companies that are doing some form of sensor IoT work. There are companies that are doing some form of digital workflow. Very, very, very few have integrated the two together in a very seamless fashion in a platform, and they're then yielding the benefits of having IoT workflow and all the data that's provided into one. So the the the reason why asset intelligence, for example, as a new product innovation can be built by someone like CHECKIT only at the moment is because we're getting all of that data. It's giving a kind of three sixty view of the built environment with with people in it. So for us, that is the point of difference. So we we can increasingly see that as a selling point.

38:38 And and the way to think about this is, in a way, it's IoT and hardware as a catalyst for future software growth. Okay? The more we get embedded into any system or an environment, the more we can unlock down the road with intelligence that's built on data. And that is the that is the point of difference, and we're not seeing anyone else doing it yet. Thank you. Next question here might be for Greg. What percentage of the 2,100,000 CapEx relates to asset intelligence? Yeah. Thanks, Alex. I'll take that one. So when I look at our CapEx this year, there were a number of projects that David's team worked on. So asset intelligence was certainly a big part of our program. We're also looking at how we scale up our platform as we grow, and I'd also point to the apps that we have where we're constantly looking to develop the capabilities within that app.

39:32 So the proportion that was related to asset intelligence will be a percentage based on there being four or five main programs that we'll have had during the year. Thank you, Greg. Next question here. Do large customer targets take longer to land, and do they come on worse terms? Yeah. Good good question. Short answer is yes and no. So so, yes, the large customers take longer to land. Just to be clear on the definition of a large customer, for us, again, where we where we target, we large blue chip customers greater than £1,000,000,000 in revenue is our primary focus in the business.

40:17 Okay? And then mid mid mid tier enterprise, somewhere between 500 to 1,000,000,000 in revenues is where the is is where the run rate business tends to come from. Okay? So large customers for us would be someone who's more than 1,000,000,000 in revenues. So think of a BP or someone like this. And they come with sales cycles that are oftentimes twelve months quite often twelve to twenty four months in time. Now thinking about land expand, the first and primary goal is to get a foot in the door. So we might get an initial deal with this large customer that's 50 k or 75 k or a 100 k of ARR. But as you can see with someone like BP, who's who's been a customer of ours for a number of years now, that soon scales to well north of a million pounds of ARR as you as you as you build confidence and you prove the stickiness of the of the platform. So in term but in in terms of the terms with which we get those large customers, now more often than not, because of their size and scale and the complexity of the service we're delivering to them, we'll find that the terms are actually very robust because you're dealing with robust enterprises who actually will want and be willing to pay for and can afford to pay for all of the key product features that make CHECKIT stand out. And, again, what we see with these large customers over time is that the margins on those contracts improve with every year that we're in with that customer.

41:39 Thank you, Keith. With the lifetime duration of a customer being eight years, how many years of sales spend will be budgeted for before converting that particular customer to become revenue generating? And, therefore, what lifetime value to cost of acquisition would you budget for? Thanks. I'm gonna give a a certain kind of response to this question, but as much as I can do. In in a way, following up from the point I just made, yes, we we now see that the lifetime duration of a customer is around about eight years. When we think about how much sales spend is budgeted for before converting a particular customer, that that's that's particularly referring to the large customer I referred that I mentioned earlier. And so at any one point in time, at least 20 to 25 of our pipe will be made up of those large deals, which may take longer than twelve months to bring in.

42:35 Every every other type of customer is gonna be have a sales cycle that's less than twelve months, and we've seen sort of on the on the shortest end, a sort of thirty day thirty to forty five day sales cycle. So for us, if you if you consider the average entry point size of of any deal is about 20 k, and for the large customers, they can grow to $4,500 k plus of enterprise value in us. When we when we look at the spend that we put into sales and marketing, actually, the the the ROI and the payback on that spend from a total value of customer is four to five times of $4.05, £6 for every pound spent even in you. So that's how that works out. Now, clearly, some some customers are worth investing more over time. And for those customers, that is a on an ask on a case by case basis.

43:26 And, you know, the market would love to see another BP or an equivalent. Those are the customers we're currently nurturing. Those are the ones who will be willing to spend more money to bring that customer home even if it takes us longer. Thank you, Kit. Got the last question, in currently. How should we look at CAM and CWM pricings? And from a customer point of view, what would a CAM or CWM value proposition, such as payback period or return on investment on CHECKIT software and hardware look like? Okay. Good. Good. Let me answer that. So just for everyone's awareness, so so CAM stands for automated module. That's effectively one of the IoT products that we have, and CWM is connected workflow management. That is the kind of pure SaaS workflow management product. So, again, what we see is that, typically, we're selling a combination of these products at the same time to a customer. So it is normally CAM and CWM, or it's CAM Plus, which is a different IoT product we have and CWM. So it's normally combinations I mentioned before. It's the end to end solution that customers typically want to buy.

44:37 So when we talk about return on investment, you know, previously, we've mentioned we've had as a case study someone like John Lewis Waitrose, where on on an approximately £2,000,000 of ARR spend, we're delivering them, you know, $2,122,000,000 pounds of in year savings, which is very high. You're talking it's it's a ten, twelve times ROI. On average, I think it's fair to say that sort of six, seven times ROI in year is the expectation on spend that customer would have with our products, which we see is pretty compelling. Thank you, Kit. There are no further questions currently. That's great, Kit. Greg, David, Alex, thank you for addressing all those questions that came in from investors today. And of course, the company can review all questions submitted today, and we will publish those responses on the Investor Me company platform.

45:28 But before redirecting investors to provide you with their feedback, which I know is particularly important to the company, KIT, could I please ask you for a few closing comments? Yes. It's been a pleasure to speak to everyone again today. We've had a really positive start to the year. And as we mentioned, from EBITDA positive perspective in FY twenty seven, we remain on track. Cash looks healthy, and we're really confident about the year that started. That's great, David, Alex, thank you once again for updating investors today. Could I please ask investors not to close this session as you will now be automatically redirected to provide your feedback in order that the board can better understand your views and expectations? This will only take a few moments to complete, and I'm sure will be greatly valued by the company. On behalf of the management team of CHECKIT PLC, we'd like to thank you for attending today's presentation, and good afternoon to you all.