Elixirr International (LSE:ELIX) — Annual Results

0:00 Good afternoon, ladies and gentlemen. Welcome to the XL International PLC Annual Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A tab just situated on the right hand corner of your screen. Please simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review all questions submitted today, and we'll publish those responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. And if you give that your kind attention, I'm sure the

0:31 company will be most grateful. It gives me great pleasure to hand over to CEO, Steven Newton. Good afternoon. Hi there. Good afternoon, everybody, and thanks for taking the time to listen to our presentation today. Hopefully, this will be some good news for all of you who are holders. And for those of you who aren't holders, hopefully, we'll encourage you to become one. We've obviously had a very, very good year with strong revenue growth and profit. We've continued to develop our four pillar growth strategy, which I'll go into a little bit deep detail later, which has delivered some great results for us, and that's all four of those pillars are working very nicely together. So that's really the the the emphasis for today is to say, look. We've had we've had a fantastic year, and we also expect that to continue into 2023, which I'll tell you a little bit about towards the end of the presentation or in fact, I'll touch on it a little bit later here too. So let's go to the next slide.

1:30 So here's the what has happened to us since we IPO ed in March 2020. That was in the middle of a pandemic. We've had 53% revenue CAGR since we IPO ed. We've had a 122 US revenue CAGR since we IPO ed, which is very, very important because The US market is twice the size in consulting terms than the the European market. So it's a represents a very important part of our strategy to be a global consulting firm positioning itself as the challenger consultancy. We we definitely need to be very, very strong in The US, so it's it's great to see that that US growth. We've done three acquisitions that Graham will tell you about a little bit later.

2:17 We've done eight earnings upgrades since IPO, which we're very proud of. And we've had a a large increase in the number of clients since IPO with 200 active clients, so that should give you some sense of the the level of diversification of our revenue lines just just there. We've got a had a 135 share price increase since IPO, listing at £2.17. I haven't seen it as of late, but it was just over £5 again today. Candidly, we're a little bit disappointed with that. If you look at the EV EBITDA multiplier, it's 8.1 times. We believe we're pretty undervalued relative to even at our IPO, we were 10 times. So we think we're pretty undervalued at this point, and, hopefully, these results will be some encourage the the right sort of EV multiplied to return. The one point I haven't touched on this slide is this estimated dilution. A few shareholders have commented that our remuneration structure, which is highly incentivizing our people around equity, creates a dilution for investors.

3:25 I'm still the largest shareholder in the company, so I'm very careful about diluting. We'd only dilute if we think we're adding value. And in this case, Nick will take you through a model that shows you how this has been calculated. But if we produce a billion dollar market cap company or sorry, billion pound market cap company in six years, we'll get a four times enterprise value multiplier from where we are today with a twenty twenty, sorry, a 22% estimated reduction dilution to the to the shareholder pool. So as a as a shareholder, I'll definitely take that all day long. And as you'll see when we describe this to you in more detail,

4:06 it's people are only gonna be earning those options and and equity positions if the company grows at a a CAGR of around 25%. And as you can see, our group CAGR since IPO has been 53%, so revenue CAGR at least. So assuming we can keep the profitability and that we our EV EBITDA multiplier remains constant, then, you know, we could see a market cap growing in linear step with revenue. Unfortunately, that hasn't been the case of late, but that's probably because of general market conditions. Let me give you some highlights of financial year 2022, and I'll touch on very briefly on the forward look, which I'll go into a little bit more detail later on. Clearly, we've had a wonderful year this year. We've got 40% revenue growth.

4:55 Underlying organic growth is 18%. The rest is, as you can see from an acquisition of Eyalap, which is a data technology analytics consultancy. This was a very strategic buy for us in around March, April time. And as and Graham will take you through some of the the value we we getting from that business already. But suffice to say, there's a lot of cross synergies between our businesses and I will also talk a little bit about this when I talk about how our revenue per partner is increasing. And the reason that's happening is we're providing more we're providing more services to our partners to take to their customers and where they have very good relationships that obviously leads to more revenue per partner. So that's very good. Clearly, we love getting awards and accolades. There's we we we do a lot of that.

5:45 And, also, as I've mentioned, we've got 200 plus clients right now. And what's most pleasing about this is there's a 21% increase in our gold accounts. And, again, a little bit later, Caroline will talk to you about our portfolio of clients and and the the sort of portfolio risk, if you like, in relation to our clients, and we've done a lot of work in terms of improving that. And, obviously, I've mentioned revenue per partner. I'll go into a little bit more detail of this, but we've seen an increase in revenue per partner primarily because we have this opportunity to to sell other services beyond just our core consulting services. And looking forward, we're looking very optimistically at financial year '23. I've just finished an last week, we had a two day partner off-site where we go through each partner goes through line by line their their sales pipeline, their their their project pipeline.

6:37 And as a result of that, we're able to increase guidance. It was 85 to 87. We think it's more likely to be 85 to 90, and obviously maintaining our excellent EBITDA margin of 28 to 30% in that range. One last thing I'd point I'd like to make on this chart is, you know, I've been running this business with Graham since 2009. We have a very experienced management team, and I'll I'll talk you through that a little bit later, that are very familiar with scaling consulting businesses like this. And, clearly, I've had myself had three tours of duty in in in sort of the top 10 consulting consulting businesses, let's say. I've done a tour of duty in three of them of about five years each. So I've I have a lot of respect for those businesses, but we're obviously trying to challenge them and and and take them down a peg or two, let's say. So that that is the CEO highlights.

7:39 I'll hand to Graham who will briefly introduce himself and then take you through the financial highlights. Thank you, Steve, and hello, everyone. Graham Busby. I'm cofounder, as Steve mentioned, and the CFO. And I also look after our inorganic strategy so I can talk to you about how I and we think about acquisitions. But, just starting off with the numbers, the financial highlights of 2022. So from a revenue perspective, revenue is up 40% from £50,600,000 to 70.7. Our partners are performing very well within this. The revenue per client facing partner has has increased again this year, and Steve's gonna talk a bit more about that shortly. The underlying organic revenue increased by 18%.

8:27 The rest of the growth, the rest of that 40% is through inorganic and was through the acquisition of Eilap, which we did in March last year. And we're very pleased with how that, has fitted into the business and the work that we're doing. And and, again, I'll I'll talk about that in a bit. Our pipeline is strong. We've currently contracted a healthy percentage of twenty twenty three's budget, versus where we are in the year. And, as Steve mentioned, we've upgraded the revenue guidance today, and are very confident about that. So we've just spent three days together as a board and partnership, team last week, and that gave us the confidence behind those numbers. We've just had three record months in a row, which obviously equals a record quarter, so we've had a great start to the year.

9:15 Going into gross profit, we delivered £23,200,000, which is 31% up on 2021. The actual GP percentage was slightly down on '21 as travel and business development activities returned to normal, following COVID, but we do continue to be meticulous over the pricing and management of projects, especially utilization to ensure that our profits remain at those levels. Adjusted EBITDA, we delivered £20,500,000 for the 2022 year at a 29% margin. This was a 30% increase from the year before. If you've looked at the annual reports this morning or this afternoon, you'll see there were roughly £3,600,000 of adjustments between adjusted EBITDA and operating profit.

10:02 Just to quickly step through those, roughly £1,000,000, was depreciation, of what of of which most is the real cash cost of the capitalized officers. Roughly £2,000,000 is amortization of intangible assets, which is an increase from last year because of the Eilap acquisition. This is a combination of trademarks, customer relationships, and customer order book, which is noncash and will decrease over time.

10:25 There's a £600,000 credit, for m and a related items. That's made up of an £800,000 debit for ILAP, offset by £1,400,000 credit, for the waiving of the return deferred consideration given a restructure that we did, which, Steve will touch on shortly. The remainder is £1,160,000 of share based payments, and this is the internal partner and employee, options plus the ILAP options from the deals. Clearly, this is noncash item and and is at a similar level to last year. So that flows through to bottom left. Profit before tax, £15,700,000, which was a 29% rise. Looking at EPS, so adjusted diluted EPS of 30.5p.

11:11 This is an increase of 26% to 2021 and reflects a 12% effective dilution for the impact of unvested options, our employee share purchase plan, and the ILAP deferred consideration. Nick's gonna cover our longer term forecast for the impact of dilution in quite some detail a bit later as well, which hopefully you'll, give you good insight on that. And given such a strong year in terms of cash generation, with, £14,600,000, a 7% increase, we're also pleased to announce a dividend payment of 10.8p per share, which is a 163% increase from the prior year. And this, this is planned to be paid in August, after approval at our AGM. If we step through now to financial performance, I just wanted to give you an idea of track record for those who haven't seen it. So, first of all, you know, there are four ways to grow a business, which are our four pillars to our strategy, which Steve will step through just now.

12:14 They are stretching our existing partners, I e, getting them to sell and do more. They're promoting partners from within the firm, from principal to partner, hiring new partners, so partners with black books

12:27 and clients who can bring them into the firm. And then what I'm looking at, which is acquiring businesses, and obviously bringing them into the group. If you look at the charts in the bottom right, you can see we've had strong growth. We've had 39% revenue CAGR over the period shown here. That scales to market that's grown at 8% CAGR over that period. So, clearly, the difference of that is that we've been gaining market share, in every year. And you can see that the, EBITDA has has risen, very nicely. Along with the revenues, we've kept our EBITDA percentages in the high twenties and thirties, low thirties as well. So very good performance. And like I said, we're confident that this will keep going outwards into '23 and beyond. I'm gonna hand back to Steve now, to talk through a couple of different views of our own revenue, and the difference between 2021 and 2022.

13:22 Hopefully, this will give a bit of transparency of how management make decisions and the impact that that has on the performance of the business. Back to you. Yeah. Thanks, Graham. Sorry. Yeah. So what we're trying to do here is to give you some transparency as to the puts and takes, if you like, in in our revenue growth model. What you can see here is twenty twenty one's revenue from 50,600,000, and, obviously, what we've we've announced today is 70,700,000, and then the the puts and takes between that. The first thing that you can see there is a return restructure. This was an acquisition we did back in 2021. We we did three things with this business. We changed the leadership. We felt that there were a few things that we needed to improve on running this this business. So we've we've changed the leadership.

14:10 We've improved the propositions by merging the procurement proposition with the strategic sourcing proposition that we already had in ELIXIA, and and that has improved that business immeasurably immeasurably. But what we also did was we exited certain contracts and certain client relationships where we were frankly unhappy with the profitability of those relationships. So all of those things were decisions made by by by leadership being, I guess, me, And that was deliberately in line with the strategy that we are trying to get release more profitable biz clients with not as much profitability, if you like, and also improve the performance of our acquired businesses. That business is now flying. It's doing fantastically well.

14:55 We've also done a very similar thing with ELIXIDIGITAL, not quite the same. What we had, we had a pre IPO acquisition called DEN, which was Graham will tell you a little bit more about that, and another business called Coast. What we've done is we've brought those two businesses together. So now we have an integral integrated ELIXONAL PLC proposition, and we've appointed a single leader of that business. And also, we've exited some marginal profit clients that we didn't feel were of the ilk that we wanted to be continuing with. Then we had some so unforeseen events, things like an acquisition by another a client being acquired by another business, for example. There was a large bank, for example, in The US.

15:41 Sorry. Midsize bank that got acquired by another midsize bank. It was market consolidation exercise. And usually what happens in those situations is the the acquired business doesn't get to choose their their preferred consulting relationship. So we unfortunately lose sometimes lose business that way. Then you'll see a

16:01 11,600,000 reduction of end of life projects. This is normal behavior. Although, I would say this 11,600,000 is unusually large in this year because we had one an unusually large project that we were working on come to an end in the early parts of the year. If we interestingly, if we had had ILAP at that time, we would have probably been able to continue with this. It was far more technical and data driven for the second or third phases of this project, and we actually lost this business to another another organization that had the ILI ILAP type of skill. Now if we'd had that business, if ILAP had been with us at that time, we would have probably had a better chance of keeping this business. If you take that unusual event out, our actual organic growth is around 29%.

16:54 But if you add that back in, it's around 18%. So we we feel very good about our base organic growth. Obviously, we we face some of these negative well, not negative, but downward pressures on revenue too. Let's put it that way. So, hopefully, that gives you a good understanding. Obviously, there's an acquisition that that obviously comes in, which adds another 15 or so million to the to the position we have there. This is another version of the same truth, and I think we had a question here about partner remuneration, which I'll I'll I'll touch on a little bit later. I thought it was about revenue, but this is about partner revenue per partner. Okay? So Graham mentioned we have four pillar growth strategy, and we cover all four of those pillars here. And you might say, well, there's five blocks here building up between the two. Well, that's true because it's not a growth strategy, but we do exit partners. And, you know, what I want to point out, Sherry, is obviously we exit partners who do not meet our performance bar. So an average of 1,530,000 revenue attainment is not good enough for an ELIXIA partner. So, you know, we we we have to take those decisions to exit.

18:09 And as a high performing culture, we we have to do both sides. We reward performance, but we also take action on underperformance, and this is what we we we had to do here. What is really nice overall, though, is if you look at revenue per partner in sorry, in the twenty twenty twenty twenty one year is that 2022 2021. Sorry. 2021 year is 50.6, and average revenue per partner is 3.15. Obviously, it's it's gone up nicely to 3.57 per partner at 70,700,000. The positive actions to the partner average, you can see after the exited position, established partners are contributing for just over 4,000,000 per partner, which is really nice because what that means is they're being able to sell the the wider services that we have now with things like the digital propositions and our data and analytics capability.

19:06 Clearly, we've made some promotions, which and the promoter partners bring in or look after revenue for us, so that's very important. And probably our most valued way of of bringing partners through the firm. And then, obviously, we've made some hires. You you the the average revenue per hire here is fairly low because they happen they happen towards the back end of the year. So they're still getting up to speed, and we should see they've all landed very well actually, in fact. And you should see those numbers going up. And then, clearly, our acquisitions add to the situation here, and that gives us the the growth in revenue per partner over So all in, the 13% from 3.15 to 3.57 is made up in that way through those four four levers and plus, obviously, the negative effect of exits.

19:59 I'm now gonna hand over to Nick, who's gonna talk you through a similar view for cash. Thank you, Steven. Nick Wallacht, I'm finance director and company secretary. So from a cash perspective, our business model has continued to perform very strongly. We we continue to see high conversion of our EBITDA less corporation tax to operating cash flow. So operating cash flow in the year was £15,700,000, an increase of 1,400,000 or 7% on FY '21. This was slightly less than the proportionate increase in EBITDA as a result of having less creditors at year end, about a million pounds less like for like, and paying higher cash tax in the year, 1,300,000 higher, as most of our subsidiary companies now are now large enough to pay tax on a quarterly basis rather than paying annually in arrears as they did in previous years.

20:50 We spent GBP 19,400,000 on acquisitions. Most of this was for the acquisition of ILAP plus a small amount of deferred consideration for the acquisition of Coast. We satisfied all of the ILAP initial consideration from cash. Rather than issuing shares for to the sellers of sellers of ILAP, we get paid the consideration all in cash, and they purchased shares from our EBT. This is a mechanism we are we are using to ensure that we can complete acquisitions with minimal

21:21 or no dilution to shareholders. In in this case, there was no dilution at at all for the acquisition of Eilab. There was a net EBT transactions and EBT and shareholder loan transactions of cash outflow of £4,900,000. Most of this was the purchase of shares for our EBT, and our balance of balance of shares held in our EBT increased from 2,000,000 at December 21 to £7,000,000 at December 22. So you can think of those shares really as being equivalent to cash as we can use them for acquisition. And in fact, we used most of that balance of shares to settle 50% of the ILAB first consideration in early FY twenty three, again, without any dilution of shareholders because we paid cash, and that cash came back to the company through the purchase of shares from EBT by by the, former shareholders of ELILAB.

22:14 We closed FY twenty two with £20,400,000 of cash, and no debt. So again, a very strong financial position, giving us plenty of cash resources for both our increased dividend of £5,000,000 that we'll be paying in August and also to cover potential future acquisitions. If I now move on to the balance sheet, net assets increased by £10,000,000 from £86,000,000 in December 21 to £96,000,000 in December December twenty two. I just pull out the the major changes on the balance sheet, intangible assets increased by £27,000,000. This is the goodwill and customer intangible assets recognized on the acquisition of ELIX, net of a £2,000,000 charge for the amortization of customer intangibles.

23:01 Trade and other receivables increased by £4,200,000. This was a combination of revenue growth. The December 22 is about 50% higher in revenue than December 21, and a couple of clients paying us in the first week or two of January rather than the last week of December. But we have no issues with our debtors. We have a blue chip client base. We monitor our debtors every week and have no issues from a recoverability perspective. We've been through the moving in cash on the previous slide, and then trade and other liabilities increased by £11,700,000 This is the accrual of the ELIX deferred consideration, where we accrued the maximum on acquisition because we expected strong performance in that business. In fact, we saw that in FY 'twenty two when they achieved their earn out.

23:48 I'll now move on to the next slide, which is our dilution model. So we've had some questions from shareholders around dilution. Clearly, the equity incentives that we give to our employee team are are very important in motivating that team and aligning them with external shareholders. And we've always been very comfortable that this structure creates far more value than it does in terms of the than the value of cost to existing shareholders in terms of dilution. And we want to set out for you our assumptions on this just to to make it make it very clear.

24:20 So we've modeled 25% organic growth in the business, compounding, maintaining our EBITDA margin of 2029%, which is where we closed last year, which we believe is sustainable. Some modest increase in multiple to 13 times EBITDA multiple in the latter years, and that gets us to a billion pound unicorn in six years by 2028.

24:43 We then modeled all of the existing option pool that the current partner team and employee team have and the options that we would grant to future employees, both new partners, four in the short in the near years, growing to 13 partners per year in the outer years, and and new employees as we grow the business and the employee base by 25% per year in line with revenue. And then if you model the impact of those options for the ones that exist today and the options being granted to new employees, you're assuming 65% vesting, and it's important that all of our options none of our our options do not vest unless you perform. So 65% is the historic average and which we've modeled and a very conservative 10% attrition rate because although we have very good attrition rates for for our industry, our unmanaged attrition is is actually higher than that. So it's fairly conservative assumptions.

25:36 This gets us to a 22% dilution in six years. So four times the enterprise value the 22% dilution. And that's both because employees have to perform to get their options, and their options were granted at market price. So these are not nil cost options that some companies use. The the the employee or partner only gets the benefit of growth in the share price because the option is part of the market price. And that limits dilution, but also completely aligns their incentives with those of our external shareholders. So so we think this is a very compelling argument for the way we've structured our our employee incentive schemes. Now I'll hand back to hand over to Caroline. She's gonna talk about business developments. Thank you, Nick. So I'm just gonna talk a little bit more about how we've actually been able to maintain these exceptional levels of growth and and profitability as well.

26:30 So the profitability side really comes down to the approach that we take with clients. We position ourselves as the MBBs, and that's actually how our clients rate us as well in an external survey. We did a couple of years back. Our clients actually named us to be most related to the likes of McKinsey, Bain, and Boston in the consulting market. So we're positioned very much at the strategy boardroom level, which means that we have relationships with the c suite executives. And it also means that we maintain those relationships throughout, you know, growth markets and potentially difficult markets as well. We're able to address multiple challenges, now even more so through our acquisitions. So where, you know, typically before, we were very much at the strategy level. We're now able to execute on that strategy as well, which is highly valuable for clients. So with the likes of our digital businesses and also the procurement expertise of return, we're now offered to able to offer both ends of that spectrum.

27:23 And that's only scaling our our clients, adding to the longevity of our our projects, and obviously then creating the growth that that you're seeing today. We we obviously focus massively on retaining clients. So we've got 72% repeat clients for 2022, which which is clearly really, really strong. As Steve mentioned earlier, we're focused on scaling those accounts as well. So we saw a 21% increase in our gold clients, which accounts worth £1,000,000 and above. And, also, obviously, bringing in new logos as well. So those three things are all, helping to obviously sustain the growth that we've been seeing, and we expect expect that to going forward as well. As Nick touched on, the reason that we're able to operate in this way and add the value to clients is very much our people. You know, we're hiring from top universities.

28:13 We've got an array of skill sets now in the business from consultants through to designers and digital engineers and also with the data expertise that Eilap brought in, in March. And as I said before, all of this is adding to the value that we can actually ultimately deliver to clients at the end of the day, which is making all of these pillars work really well, and it's helping to retain the clients and and bring in new clients as well. Looking a little bit more closely at 2022, on the left hand side there, you can see our top 10 clients. Really, this is showcasing not only do we have low levels of client concentration, and that's been improving year on year since our IPO. For example, as IPO, our number one client contributed 25% of the business, and now it's only 8% or just under 8% for 2022.

28:59 So that's improving every single year. But the other important point on this slide is if you look on the left hand column and also, the third column as well, you can see we're working in an array of industries, an array of geographies as well. So we're very, very diversified in the market, which is making us exceptionally resilient, particularly to the current market conditions. You know, we're not relying on one industry, and we have multiple capabilities to offer to clients so that we can, you know, we can increase those certain capabilities maybe in down trending markets and increase other capabilities when clients draft maybe more innovation and growth as well. So this is making us exceptionally resilient and, again, why you're seeing the performance that you're seeing today. Just looking a little bit more at our teams that I mentioned earlier, we have a team of around 500 employees.

29:48 Some of these are based, well, they're all based across the globe. We have team locations. But based on the fact that we operate under one p and l, we're able to place people on the right project. We're very, very flexible with that approach, and it means that we our clients are getting the best value from our people as well, which makes it incredibly, you know, increase our ability to scale, which is which is fantastic. On the right hand side, as Nick Nick mentioned, we offer all of our employees no matter what their role, no matter where they're based, they're all offered equity, but they have to perform to get that equity. So you can see on the on the right hand side, the 64%, those those are the people that performed and that they actually got their options for 2022. So we're very prestigious on actually handing out those options. People know that there's a very high bar that they continually have to meet, and that's crucial as we scale, obviously, to retain that quality and to retain our market positioning, which is why we're able to, again, hold those levels of profitability.

30:45 So I'm gonna hand over to Graham now to talk a little bit more about each of our acquisitions to date and and how they've landed. Thank you, Caroline. So we have done four acquisitions to date. One of them was pre IPO in 2017, which is then, as you can see on the left there. And then we've done, one each year since then with Coastal Term and ILAP. I think it's important to say that every acquisition acquisition we do is earnings enhancing. You can see on the middle row there, how EBITDA has increased quite rapidly. And for us, it's about market integration. It's about getting each other into each other's clients and making one plus one equals three. It's not about back office, synergies or integration, which is probably more the private equity model.

31:32 We actually want to, do different things with our clients, new things, and be able to give them the value for that. And and in return, we get, you know, new clients asking us for the latest and greatest. To show you, then they are a creative and digital agency and then coast at the other end of the spectrum, digital marketing. Together, we treat them as a kind of a digital capability, if you like, as ELIXIA digital, and I'll give you a couple of examples as to how we've gone to market together there. Return focus on procurement, transformation, supply chain, and cost, and in a, bearish market, obviously, that has come into its own recently.

32:18 And then Eilap last year, which was our our biggest acquisition to date in The US, that is data and technology. And, again, we've shown great success, amongst our client set, working together there. Just to give you a couple of examples, starting with ELIXIR Digital, so Devon Coast. One, UK insurance company we were working with with with a consulting hat on, if you like, was a relatively, you know, good good sized project. We were doing a sprint with them, but then that evolved into actually designing and building the, the outcomes of that sprint. And it actually turned into a £1,000,000 plus client. On the EDX side, the ELIXIA digital side, they had a client, which was a UK national standards body, where they were doing some digital marketing with them, things like pay per click and and search engine optimization.

33:14 Again, relatively small to start with, but then they brought in the consulting team, and we actually transformed their full digital experience. And that, again, became a multimillion pound client. So really good synergies between the two. Looking at return, you know, one consulting client we had was a Jersey subsidiary of a national bank, one that everyone here would have heard of. And we did a small piece of work with them around business continuity planning, but then we brought in return alongside us to then look at a load of their big third party contracts, which which gave us a a a several months worth of work. On the flip of that, Return had a UK media company where they were looking at third party spend again, but more with a tactical lens. And then they brought in a consulting team to look at the operating model with a far more strategic view. And together, we we saved them more than £20,000,000.

34:06 Likewise, doing the same with ILAP. We had a or we have an African bank that we've worked with for many years, and we've worked all the way across the bank, never in data. And with ILAP joining ELIXIA, we were able to, help them with their data strategy and then actually execute the road map at the back of it. And on the flip side of that one, ILAP worked with the US regional bank, and still work with them and brought in ELIXIA to to really talk to the board and and to the leadership team about their overall strategy, not just data, and that helped us both, get into new parts of the bank together. So, you know, big joint projects that we're working together on, and it it's really proving out the strategy very nicely. Thinking about going forward, if we go to the next page in terms of growth prospects, you can see on the left there some of the pipeline figures that we have. I've got a dedicated team, working on this with me. And since IPO, we've screened over 3,000 boutique consultancies.

35:08 I've personally engaged with nearly 400 of them and had introductory meetings with a 130. And you can see how those numbers flow through the pipeline. You can see that we've got to to due diligence with eight, and we've done four deals in total, three since IPO. I think, importantly, the difference between those two is that we could have done eight, but we pull out due diligence if we don't like what we see, and it doesn't align to what we are as a business. What does that mean? Well, some of the things we look at on the right hand side there, and and I touched on this in our last presentation. So if you did hear it, then you would have heard some of it. But, hopefully, those who haven't heard, it will be useful to know. We have a programmatic way of looking at acquisitions. So what that means is looking at one or two deals a year where together it makes up 20 to 30% of our market cap.

36:00 So that's different to doing multiple small deals, and it's different to doing one massive deal. And it's actually proven out to be the best performing m and a strategy when looking across the most successfully acquisitive companies around the world. And for us, that's been underpinning, strategy to date, and and it and it will do, as well going forward. What we look at is, from a capability point of view is board boardroom issues. So we want the best boutique, businesses who deal with, boardroom issues, that either we do part of or that we don't do yet at all. So, for example, one that we might be part of is data with ILAP. That that takes a a big tick across the data spectrum, but there are elements that ILAP don't work in, and we would love to add to their overall capability either through bringing them in to do that piece or even there could be a geography angle that the data, behind it makes sense to do.

36:59 Other other areas to look at could be competitive intelligence, you know, digital. We've looked at innovation, ESG, cybersecurity. These are the types of issues that the majority of our clients are are grappling with day to day. And, you know, the strategy is to get the best of the best boutiques in each of those boxes and then stitch them together and work together to create the most shareholder value, but importantly, actually, most client value, so that we we get those long term, large clients, for for for years going forward. The service, quality needs to be excellent, quite frankly. That's what is behind our brand and has been since day one. We have pulled out of due diligence amongst, some of the companies we've met with because the quality of of the work hasn't been there.

37:48 But, you know, obviously, also quality of, earnings. We've shown you how strong our our p and l and balance sheets are, and what we don't want to do is is erode that if we don't see sight of kind of bringing them up to the levels we're in. I mentioned geography from a data perspective, but it can be it can get us into new geographies, or it can actually go behind investments we've already made. US is a big investment geography for us. We've we've made no secrets of that fact. It's a large part of our revenue for last year, and we are actively looking at further US acquisitions. Likewise, UK, EU, and South Africa is where the rest most of the rest of our revenue is. And, you know, it it will make sense to make acquisitions in those areas as well. You know, one thing we don't do as a consultancy business is invest in a, geography first and kind of cross your fingers and and hope that clients are gonna follow.

38:42 We've always gone there through client demand, but another way we can go into new geography is through an acquisition where there are clients, there are people, and the demand is there already. And that's, that's a key part as well. And then finally, aligning the deal structures. The way that we structure the deals is based on, an EBITDA valuation. So getting an adjusted EBITDA number, agreeing what multiple should be applied to that based on historical growth rates, client concentration, you know, quality of earnings, etcetera, and then getting to a consideration number, which we then look to divide a third, a third, a third. So a third cash, a third ELIXIA shares day one to get them, you know, hopefully, major shareholders coming in and and therefore highly aligned to our partner team. And then they can earn the final third by achieving targets over the next three years post deal.

39:33 So what's nice about all of that is it really does align to the our our whole partner team, and it's very much part of the entrepreneurial nature that's given us the success today. So with that, I'll hand back to Steve to give you a view of the outlook going forward. Thank you, Graham. Yeah. The first thing I'd I'd like to look at is when looking at the summary and outlook, I just wanna touch on the quality of the team that leads this company. Just focus your your your your eyes on the the middle row if you like there for a second. These are this is essentially my leadership team. Claire Philby, I've known for years and years, but she used to be a the COO of Accenture, and she's now our CEO, and she's been with ELIXIA for nine years. So Claire's Claire really understands our business, and she also knows how to scale consulting businesses because she was a strategic leader in the Accenture organization as it's scaled here in The UK.

40:30 And everybody can look to see how how that business is seriously scaled and delivered value to its shareholders. Graham, I won't touch on. He's in the room. He's my cofounder. But Brandon is another name I should pick out here. He's also been with us for nine years or so eight years or so now. And he basically runs my our sales and marketing activity. And he's done a fantastic job since IPOs as as you can tell from the 30,000,000 that we 30 roughly 30,000,000 we IPO'd with to the 70 odd million that we we're we're trading at now. He's done a super job. His background is PwC Infosys. He was one of the first people to join emphasis when they were trying to build a a consulting business. And in five years, they built it to 5,000 people globally. So that's a pretty good track record in terms of scaling a consulting business from nothing. Ian Ferguson is my cofounder.

41:21 Ian was a Magic Circle law firm for thirty years. He was with Alan and Overy. He was the partner leading their corporate corporate law practice. So we pretty much have probably one of the city's best lawyers as as our general counsel, and so we we we're pretty watertight in the legal space. And Eric Rich is another name I should point out. He was he's also been with us for quite some years now, seven years in ELIXIA, and he was actually appointed into emphasis and ran the the emphasis business when Brandon was there at the same time and ended up running it for five or so years after that, after after Brandon left and also had PLC in his background. And Nick, who you will have heard from earlier, Nick is used to be a client of ours. Actually, he was an FD of one of our clients and liked the business so much he joined us. So thanks for doing that, Nick. And then Caroline has been with the firm five years. So it's a fantastic leadership team, and I'm I'm very proud to say that this team is very, very capable and and obviously very able to scale businesses like this and have been there and done that and worn the t shirt a few times, let's say, in in doing that. I also wanna touch on the rest of the partner team just quickly.

42:36 There's been a few questions here about attracting partners and incentivize the incentivization model for partners. So I'll just pick that up on this on this chart here. All of these people below the the the sense central line there can actually go into the marketplace and earn a a partnership's income out of, wanna say, the big the big top 10 firms. So just quickly about that industry, I had a question here about the industry and how you see see ourselves. I'll just quickly touch on that as well. The industry is basically broken down into two halves, if you like. The first half is the top 10 consulting firms account for about 50% of the global consulting spend out there, and the top 10 firms are the usual suspects, McKinsey, Bain, Boston, KPNG, Accenture, IBM, PLC, and if I've forgotten one, I've forgotten one or two. It doesn't really matter.

43:29 You I think you know the the the names in there. They're almost household names. The bottom 50% of the market or the other 50% of the consulting market is accounted for by by about a 100,000 boutique consulting firms. And and the difference between these two groups of consultants is actually quite stock. The the the boutique firms have to be far more scrappy, far more entrepreneurial, and actually better in certain instances than the big 10 firms because they otherwise, they wouldn't win the business. They don't have the brand power. So you often find in those boutique firms a a very competitive, a very capable, and very skilled set of individuals.

44:14 And these are the sorts of people I'm looking to attract to ELIXIA with the equity incentive model. And that's the big difference with a person sitting in a top 10 firm. They largely there's subs one or two exceptions in the top top 10. There's only three listed firms in that top 10 group. The rest are all partnerships. So they're turning up for in year cash remuneration, and they're not turning up for a five year equity story. Whereas most people who start companies at aka the boutique consulting firms as an example, all starting those companies to create equity value for the long term. That's how they they they see themselves generating the the the wealth they'd like to generate. This is true for 90% of the all of the people on this page, for example.

45:02 But just to give you a sense of what that looks like, any one of these people can go and get an average partner salary pay, and I use the one that's got the lowest average pay. By the way, you can get this information of companies as a website, KPMG, PLC, Deloitte's, all the all the LLPs that are are are registered in The UK have to publish their accounts on Companies House. They have to show their average partner pay, and they have to show their CEO pay. So the average partner pay for the lowest one is KPMG at at about a million pounds. So each partner in KPMG on the average would be getting a million pounds. What's the maximum my partners can get? $363,100 yeah. £360,000 is the maximum they can get, and that's if they hit all of their targets. They don't that's not average. That's your top of the house. You get you get your 360,000.

45:54 So all of these people could go and get 700, give or takes, 700 640,000 more at at at a KPMG, which is the lowest paying of all the partnerships. Okay? What do they get for that? They get shares in our firm. They get options. Market price options, which is what Nick was talking about, so that they get the growth in the share price. They don't get an existing grant, if you like. They get a £3,000,000 option at market price. Why? Because over five years, that's what they've given up with KPMG. Let's say, in KPMG, they'd get make 5,000,000 over five years if they were on the average. So they're getting with us 1,800,000. They're giving up 3,200,000. We give them a £33,000,000 option at market price. If they double the firm, they get £3,000,000. If they triple the firm with with us, they get £6,000,000.

46:47 So the motivation for them is very aligned with growing the business and the equity value of this company. They can outperform an opportunity in KPMG over five years. If we get this company to a billion dollars, the opportunity for them is somewhere between 9 and 12,000,000 when you add it all together as opposed to, say, a 5,000,000 opportunity in in KPMG. But they have to sacrifice before they do that. They have to sacrifice the fact that they could go and get the million in cash as opposed to the £360,000 that they get from us at a maximum. K? So they have to be in that mindset. So what you're seeing here is a group of people who are very entrepreneurial, people who are very hungry and very aligned with the interests of any investor community that participates in our in our share price growth.

47:37 So we think that is a a highly motivational tool, and I see it every day. This this is the best group of partners I've worked at. I've been in this industry off and on because I did a few startups for about thirty years doing tours of duty in IBM, KPMG, Accenture. So I've seen it from partnership side, corporate side, systems integration, you name it. And I've never seen such a talented group of people working with single purpose improving the share price, and the teamwork is phenomenal. We've extended that down into the into the organization. There was a question here about pay of our people. Are we face facing pressure? The equity model is very differentiated. We want to push the entrepreneurial story and entrepreneurial risk story into our people. We the difference here is we don't pay our people less.

48:23 We also to sacrifice salary to participate in an equity scheme. Okay? So where we tell our partners they won't get the million pounds on average, they have to start straight out of the gates with almost a third. With our people, we give them the option to opt in, and that way we determine how many people have the right kind of mind mindset as well. We do grant them options for performance, as Caroline said, but that's how we use all of these levers to work together to drive the performance of our company and all all linked to share price and all 100% aligned with any investor community. I think I knocked off a number of those questions there, I hope. Let's look at the outlook. We are very bullish about our business. As Graham mentioned, I think I might have touched on it too. We had our team together last week, and we did a bottom up revenue build, and hence, we did the revenue upgrade that we've we've forecast today, 85 to 90,000,000.

49:22 We still believe we're gonna be in our EBITDA range. And as I think Graham mentioned, we've done three record revenue months at the start of this year. So each month was a record, and that means that q one was a was a record, and we see that momentum continuing. We've done 52% absolute growth in the first quarter, 19% underlying organic. So we're we're very bullish about what's in our pipeline and what's coming down the line. I think the fact that we deliver such high quality differentiated services to our clients because our people are so motivated to deliver for the long term, you know, the one thing I perhaps didn't mention about that sort of the two halves of the consulting market being, you know, the top 10 and and the boutique firms, if a big brand fails publicly or screws up on a project or something like that, it doesn't really affect them.

50:15 Whereas a boutique brand, if they do that, they can go out of business. So the the focus and the emphasis on quality in the boutique world is super, super important because you can't sustain a position if you don't deliver to your clients because the big firms will just take it. No one ever got fired for hiring a big firm. Alright? So it's much, much harder to win work. It's much, much harder to continuously outperform them, and it therefore makes you very hungry and and and very agile. And when you've got an equity model that plays towards your success, that's why we're putting ourselves right in the middle of that debate. We're trying to push pull as many of the the talented individuals we see in the boutique space into a a model where we can really stop taking a a real challenge to the top 10 firms rather than dividing and conquering through a 100,000 different firms.

51:10 So we have market leading in growth, both organic and inorganic. We're very resilient to recession. Perhaps I should just quickly touch on that why we think that should be true. In growth markets, you're focusing on revenue enhancement, innovation, new products, new markets, new geographies, m and a. In contracting markets, you're focusing on operational efficiency, cost reduction, procurement, sourcing, blah blah blah. And if you could cover both sides of that equation, you actually find if you look at the consulting industry over fifteen, twenty years, it's grown consistently on average for fifteen years at 15% CAGR. The last few years, it's actually grown faster, but now more recently, it's forecast to be a little bit lower, sort of in the 8% range, as Graham mentioned, since 2017.

51:56 But it's still a growing industry, and the reason it grows through recessionary periods regardless is this point, is this cost reduction and there's also revenue enhancement. Or, you know, there's there's profit maximization activity, which is just as important as revenue enhancement activity. And we're fortunate enough or experienced enough to know that we've got to build capabilities on both sides of this, and hence, we see the resilience in our business. I've made the point about our team or as invested as all of, our institutional and private investors. And, the summary that Caroline was putting out is we we believe we have the quality of our MBB with the agility and entrepreneurialism, let's let's call it, of the boutique consulting firms. And, essentially, what we're trying to do with that acquisition strategy is bring more and more of those people to the table, participating in the equity play that is 100 aligned with anyone who's invested on this call and anyone who chooses to invest on this call. So very, very bullish, and I think what I'll do is now look at some of these questions and see That's great, Steven. Let me just jump in and just give you a small break between the the q and a. But thank you, Graham, Nick, Caroline, also for your update and presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab just situated on the right hand corner of your screen. But just while Stephen and the team take a few moments to review your questions submitted already, I just like to remind you that a recording of today's presentation, along with a copy of the company slides and the published Q and A, will be accessed via your Investor Meet company dashboard. Stephen, as you can see, you've received a number

53:26 of questions from investors today. So thank you to everybody for your engagement. And I know you have touched on several of them throughout your presentation, but I wondered if I may, Stephen, just ask you to read any out there where you feel it's appropriate to do so, and then I'll pick up from you at the end. Yeah. So happy to do so. Thank you. I have touched on quite a few of these, but I'll pick one or two out that I think and then ask some of my colleagues to answer it in the case if I think they're more appropriate to answer than me. The first one, amazing track record since IPO from Chris. Why does the market not value the opportunity? Good question. Would you consider buying stock back on any weakness? I would love to buy. Unfortunately, Graham and I are in a concert party, which means that if we make if we buy one share, make have to make an offer for the whole firm. I'm not ready to do that just yet, but I I think that, you know, it's it does present a a very big opportunity. Do you wanna add anything to that? Yeah. So definitely from a personal point of view. From a from a company point of view, we are buying through the EBT that we have.

54:30 And what that allows us to do is use those so buying from the market and then using those shares as a currency for acquisitions and new partners. So that's you know, as as the share price is low, that's obviously a good thing to do. Graham, while you have the mic, can you talk a little bit about your expansion from James? Plans in The US. ILAP sounds like a good deal. Where do go from here? Yeah. So you like I I said earlier, ILAP is the biggest acquisition that's in The US. It does data analytics and tech brilliantly. There is plenty of space in The US to to buy something else. So the The US consulting market is two or three times bigger than the European market, which gives you a sense of the the scale there.

55:15 When you look at the revenues we have there now at 44 percent of of our global revenues, you know, it will, at some point, inevitably tip over the 50%. And that will be a a combination of organic and buying other, probably, non data companies, but I've got several conversations ongoing. So, yes, absolutely. There's a question here about how how's the labor market for ELIXIA? I think we've touched on that a little bit, but maybe I should just elaborate a little bit. And what about wage inflation? Essentially, if we what we look to do throughout the business, and this is an industry wide thing, if we do increase wages, which we have done this year, and we do pass that on in in rate hikes to our our clients, so we look to recover that from clients.

56:03 But, also, what I would add into that that's slightly different in our case is we do have a more entrepreneurial type of employee who is investing their own money in our shares, which we match, and also, obviously, the option performance option grants that they get, which creates a level of stickiness. So I don't think people are as short term in our businesses as they are in typical organizations. They're far more strategic about what they're trying to achieve and looking at things over a a sort of an equity term period, which could be three to five years, let's say. So I think that's quite interesting. I think I've covered some I've covered the partner pay example quite specifically. That that's a question that's been asked here. Well, management, look at I think you've touched on that, Graham. Yeah. I I can deal with that first. So so the the question presubmitted, ILAP has performed better than expected.

56:59 I would say as expected. That's that's where we set it, and that's what we saw. Will management look for further large acquisitions despite the economy getting worse? I think I answered that. Yes. Would you consider to fund this with debt, especially since that has now become expensive? The answer is yes. Obviously, you know, we have equity to to to use as we see fit with what's in EBT. We've also got great cash reserves that we can give as cash or as cash for them to buy shares. But, you know, I think the beauty is that we combined our very large shareholders of ELIXIA, so we will always choose whatever the right shareholder answer is, and that will be a combination of cash and equity currently, and no doubt will be debt in the future, especially if we're looking for bigger and bigger acquisitions.

57:51 So I think we covered there's a question here on dilution. I think we covered that appropriately in in your Yeah. Yeah. Or shall I just just just to reinforce the point, there's a question from KT. Will all these options dilute the overall number of shares in issue? And on the dilution slide that we had in the presentation, I mean, the answer the answer is is yes, but only in a very limited fashion. I mean, that project those projections showed 22% dilution for a set of assumptions which had us growing the share price and enterprise value by fourfold, so we're coming with a billion pound market cap company. So the dilution will be significant know, is is marginal relative to the value creation. Do you wanna there's a question here from David. What is the most common type of project that companies hire LUXIRR for?

58:40 Yes. So, typically, I I probably said it earlier. It's what is being dis discussed at the executive level or the board level. Importantly, it's the strategy side of that issue, But I think what really differentiates us versus other strategy consultants, if you like, is we can actually then do the execution, and that's where we get long term trusted adviser status with our clients. Katie's asked a question here. Are you thinking of a US listing? As I said at the start, I think that it's inconceivable that we do not have a sizable US business. And if it becomes appropriate that we we have a listing there, then that would be a consideration at the time. So, you know, the market in terms of consulting dollar spend is literally double the European market. So if our US business is twice as big as our European business because we follow the market almost precisely, let's say that's the the eventual outcome, it would be it would make logical sense for us to have a some form of US listing. What form that'll take, we'll we'll wait and see. But it's it's something we we would consider at the time. As I said, our use business is growing fantastically and doing very, very well.

59:55 So I think we're out of time. We've covered most of the questions. Some of them I have covered I think most of them have been covered. So thank you very much for your time and your your questions. It's been a a great opportunity to present and talk to you, and hope hope all of you will become if you're not holders already, hope hope hopefully, you will become holders soon. That's great. Stephen, Graham, Nick, and Caroline, thank you very much indeed for your update and presentation and for taking your time to go through those questions. Can I please ask investors not to close this session as we're now automatically redirect you for the opportunity to provide your feedback in order the management team can better understand your views and expectations? This may take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of Exilia International PLC, we'd like to thank you for your time this afternoon and for attending today's presentation. Good afternoon to you