Fonix (LSE:FNX) — Final Results

0:00 Good afternoon, and welcome to the FONIX PLC investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged and can be submitted at any time by the q and a tab situated 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 it receives during the meeting itself. However, the company can review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, I'd like to submit the following poll. I'd now like to hand you over to Rob Wees, CEO. Good afternoon, sir. Thank you very much, and hello, everybody. I really appreciate your time this afternoon, as we talk you through our year end, presentation, which we announced, on Tuesday for, f y twenty six. My name is Rob Weiss. I'm the CEO of the business. I'm take you through the business.

0:50 I'll hand over to Michael, my CFO and COO, to talk through numbers, and we'll come back to strategy and where we're going. So I'm delighted to say as an organization, we traded ahead of market expectations this year. We have grown in a number of our areas of business line in our core product set, and we're very focused as we always have been on delivering revenue growth consumer client contracts and and services which provide long term sustainable profitability. When we win a piece of business, we tend to retain that business, work to grow that business, work with those customers for a number of years. Hence, why I think some our top 10 customers, the average contract length of those clients is circa over nine years. So it gives you a good view as to sort of the the sort of long term relationship we have with those clients.

1:48 In the period, we're gonna talk a lot today about our where we're going as a business internationally. We were delighted to announce that we went live in Portugal. We also went live in Switzerland, and we're building up momentum to grow into other markets with, France being named and another market in the in the pipeline. We'll talk a bit more about that in in a moment. Alongside that, in terms of where we're going as a business, as a company that traditionally works in SMS, we are looking at how consumers engage with us, the pin the points of entry, when they want to engage over a communication path when we have clients with big audiences, and then how we would take them on that journey of interactivity, and how we would charge them. And we've expanded our product set in the year, and we look to evolve that product set into coming years on how we do that, which we'll come into more detail.

2:42 We increased our ordinary dividends. We have done it each year for the last six years, we were pleased to do a £2,500,000 buyback in the year due to some cash we had as part of our ongoing cash accretive start business, and we were able to do that. Just to recap, for those of you, here that are less okay with what we do as an organization, Our business heritage has come from plugging into all the mobile operators in a particular territory. So for example, in The UK, whether it's e three, Vodafone, Sky, and o two, and we technically integrate to those mobile operators, and we take a couple of products from them. We take the ability to send and receive SMS messages so that we can, on behalf of third parties, engage with a a mobile number, send and receive a communication a mobile number, and also have the capability of putting a charge on that mobile phone bill.

3:44 We take that capability, that raw piping capability, and we build a whole suite of technologies such as competition mechanics, studio text to studio, texting texting, donations, all sorts of alerts and reminders, surveys, information services, voting, and we take them to a particular set of verticals. Our verticals that we've always focused on has been TV, radio, charities, and entertainment businesses, and we have built a relationship over the last twelve years or or a reputation over the last twelve years of being a market leader in providing these types of services to household names, in particular in The UK.

4:32 For those of you who are in The UK, you'll know everyone from ITV, Global Radio, Channel five, Bauer Media Group, Comet Relief, Children Need, any text interaction, you see that they're running, FONIX is running the back end of. And we provide the, as I said, the capability to interact and charge consumers depending what they do, all in a highly scalable, highly auditable, highly robust platform that allows our clients to report in real time, to do things like win a pick, to be able to take donation amounts and feed it through to production. So you can imagine Comet Relief on Red Nose Day, Davina McCall wanting to say on on air how much they've donated any moment in time. It's our platform behind the scenes running that, providing the the counts.

5:26 I'm gonna hand you over to Michael now who's gonna talk about the numbers, and we'll come back to the business and a bit more of the strategy. Hello, everyone. I am Michael Folks. I am the CFO and COO of FONIX. I'm gonna start by taking you through some of the operational highlights. I'll talk through some of the financial KPIs, and then I'll talk a little bit about the financial, broader financial statements before a bit later talking about some of our products in in development as well. So firstly, looking at the operational highlights, there are two main parallel growth strategies we're pursuing as a business today and and in this financial year. The first one is around product innovation. So that's all about how do we increase the volume and the value of transactions with our existing customers because we we get paid on a revenue share on every transaction through innovation. And there are three new sort of core products that we've been working over the last couple of years that have helped enable that in the period, and I'll talk a little bit about more of those in more detail as we get further through the presentation.

6:21 The second thing we've been pursuing in parallel is our international expansion strategy, and I'm we're pleased to say as at today, we are either live or in the process of getting live across six markets, across Europe. So alongside The UK, Ireland, and Portugal is all being now established markets for us. We've also launched two customers in Switzerland in the pilot phase. We've set up a company and hired two people in in France or one in France and one French person nationalist come to The UK to support our French operations. And we are also progressing a sixth market that we've connected into. We've not yet announced it, but we expect to, hopefully, by the end of the year and be live there. So there's lots more opportunity within the business. To enable both of those strategies, we've, one, had to increase the size of our team.

7:08 So on average, we had 58 people in the business over the last financial year. That was up from 52 in the previous year. So in absolute terms, not a huge number of new heads, but in percentage terms, that's quite a big increase for us. We're up to about 60 people today, and we feel we we are well. We have a lot of capacity now within our business despite being having still having a very high operational leverage to grow and deliver on the growth strategies that we are pursuing. And so we've increased our headcount, but we're expecting it to stabilize a bit more now having grown a lot in the year. Alongside that, we added eight new connections or integrations during the peer the period, and that's largely to enable new markets, so new connections connections and new geographies to mobile networks, and also enable new products. So we've connected to a number of PSPs over the last couple of years. So that's the like likes of Stripe or Adyen or checkout.com.

8:01 So there is those are online payment providers that we have connected to to to facilitate payments on behalf of our customers, and that's an increasing strand of growth for our business. Throughout the period, we've had a 100% platform uptime. It's probably the most understated value proposition we have as a business. And if you spoke to any of our customers, it's probably one of the main reasons they chose to work with us is that we have a and continue to have a very, very good reputation for being very reliable and never having any issues. So that's been really critical. We've had that throughout the period again. And as always, 99% of the opportunities we pursue as a business of a of our sorry, are of a repeating nature. So they're not subscriptions, but we look to do things that are repeating with our customers. So that might be a manual basis with charity telethons.

8:48 Some of our customers, they repeat services on a monthly basis. Some now increasingly repeat them on a weekly basis. So the same services running week after week after week with consumers transacting on those services. If I move on to the KPIs, of the business, the number one growth metric for us as a business is gross profit. So for anyone who's not familiar with our company, I can explain a little bit later why, but revenue is not a meaningful metric to us. It never has been. Gross profit is the number one indicator of growth for us. That's grown really strongly in the period at nearly 13% growth. That has largely come around from one strong growth in our UK media customers. Alongside that, we've added Portugal as a new market, so it's become established in the year having not had any income in the previous year. So that's the main driver of growth profit growth.

9:33 The second most important metric to us as a business is adjusted EBITDA. It's what what we consider the bottom line of our p and l. That's largely grown in in line with gross profit apart from we've made some additional investment in in people to support new, growth initiatives. So particularly in France, we've hired two people, not yet generating any revenue there, but we expect that to pay back in future periods. So there's been a little bit more cost than there has been gross profit growth, but that's all about investment in in future opportunities. Adjusted profit before tax hasn't quite grown as strongly as EBITDA growth. That's partly because we've been in the of the compound investment we've been making in in our product over the last few years. We amortize all our software development over on on a three year basis, so there's been gradual increases in our amortization expense that have impacted that.

10:21 Alongside that, we hold quite a lot of cash, and we make interest on that interest income on that cash. That has gradually tapered off due to to falling base interest rates. We still make significant amounts of interest income, but it's come down a little bit. And that's why the profit before tax hasn't quite grown as strongly as as the EBITDA growth. The other metric on here is TPV. That that means total payment volume. It's a to a degree, it's a leading indicator of growth on our on the payment side of our business. So that's the total volume of consumer transactions we are processing as a business. That's grown to eight percent in the year. It's largely in line with the the growth gross profits growth in our our mobile payments business. Apart from there was we actually lost a couple of low margin gaming or gambling customers in the period who left The UK market because of changes in The UK tax registering back legislation back in October, actually came into force in April, they've left the market. It had a disproportionate impact on our transaction volume in comparison to our our gross profit.

11:21 But it's not a core we that's not a growth core core market for us anymore. If I look at the long term long term performance of the business, this is a graph of our EBITDA and gross profit over the last eight years. We IPO ed the business back in October 2020. So as you can see from this chart, both pre IPO and post IPO, we've had a very pretty consistent growth trajectory. Over the last eight years, gross profit has grown at about an average rate of 19% per year, and EBITDA has grown an average of 23% per year on a compound basis. This year, we returned to double digit growth in both of those metrics, having had slightly steadier growth in the previous financial year. That growth growth rate in the previous financial year was indicated to the market that it was expected, and it was just us transitioning to a new growth strategy, which is what we are now delivering on. So it's an international focus mark international focus growth strategy alongside new some new products that we're launching.

12:22 So I've talked down to oh, sorry. This is looking at the segmental analysis of our business. So I've already described how revenue isn't a meaningful metric to us. The re to add a bit more color why that is the case, gross profit to us represents our share of every transaction that we process. So for a payment, it's our commission on a pay the consumer payment. For an outbound marketing communication, it's the the the fee that we charge to our customers to send that message to a consumer. So it's the most it's the most important part. It's where we make our money. Revenue, on the other hand, for for certain business lines where we're working with a mobile network, so it's not all our business lines. We are seen as an agent of the mobile network selling effects telecoms payments or telephone messaging on behalf of that operator. And as a result, for accounting reasons, we have to include the operator's profit we think they've made on those services within our revenue number. So it's our profit plus the revenue the operator's profit. So it's a little bit of a meaningless number. It can jump around for all sorts of reasons. It jumps around depending on geography, type of service, changing different products mix. So for example, we lost a lot of, several gambling customers in the period that were low margin to us, but the operators were making quite high margin from those services. So it it has an impact for lots of different reasons.

13:36 So the number one thing to focus on here is gross profit growth. Mobile payments has grown really strongly, 11% growth for the reasons I described earlier. That strong growth in our UK media customers alongside the introduction of Portugal. Both of those factors have also paid into the strong growth in our messaging business line with the addition that we also run some enterprise messaging services overseas CPaaS businesses that connect looking for connectivity in The UK. That has also grown strongly in the period as well contributing to that strong growth in mobile messaging. And then the final business line, in absolute terms, it's not as significant, and there's been a small very small decline in absolute terms as you look you look at the GP number. But managed services has come down slightly. That just relates to some additional fees that we incurred from a mobile network in the period or a couple of mobile networks in the period. It doesn't relate to any loss of clients or business in the background.

14:29 I've talked down to gross profit growth, so I'll just go a little bit further down the p and l. So the next line on the p and l is adjusted operating expenses. Those have grown at 20% in the year. That's all really to do with the increase in headcount that I described earlier. So we've added two people in France. We've increased the number of developers in our business. We only capitalized 66 of our development expenditure, so that also has an impact on our p and l when they're we're making new hires there. And we have now got to to such a scale that we felt it necessary to bring in a in our first senior legal legal counsel internal within our business because we're working with so many different partners, operators, and customers in new territories. It was important that we had someone dealing with that full time. So there's been some additional overhead that we've absorbed largely focused around growth opportunities. So as I described, two two heads in France that are not yet making a return for us, but we expect them to in the future. Arguably, there's probably £200,000 worth of exceptional expenditure we could have added back that we chose not to. But that explains that why adjusted EBITDA growth is slightly below gross profit.

15:32 A little bit further down the p and l, amortization has increased because of the compound investment in our product, so this is effectively staffs capitalized staff costs that are now being amortized on a three year basis. And then a little bit further down the p and l again, where it says financial expense and income, that's actually net income to us or interest income. That has fallen slightly because of falling, interest rates or base rates in the background. If I then move on to the cash flow, the the other dynamic to be very aware alongside revenue not being meaningful is that we the actual cash balance within our balance sheet isn't particularly meaningful to us. We earn interest income on it, so we it's important from that perspective, but it includes all the working capital and cash we hold on behalf of our customers.

16:18 So for that reason, we also, in our in our financial results, present an underlying cash flow balance cash flow, and that's the that's that's our cash that we hold as a business. It strips out all the working capital on behalf of customers. That's the important thing to look at. It's been relatively stable in the period. It's come down slightly because we made some additional one off distributions to shareholders. So we did a two we chose to do a £2,400,000 share buyback a few few months ago. In the previous year, there was a £3,000,000 special dividend. So we we over the last few years, we've we've as we've had excess cash, we've either done a special dividend and a buyback. It just happened this year. We we chose to do a buyback. Buybacks are generally a little more challenging for us because we have a concert party in place. We were able to engineer something this year where a member of the concert party participated in the buyback, so that allowed us to avoid a whitewash.

17:06 It's possible that it's very likely in future years that we will have some excess cash again. Our underlying dividend policy is to distribute 75% of adjusted earnings per share. Over time, we just that extra 25% that we're holding back tends to get distributed because we don't really have a need for cash. We don't we don't we're not capital intensive in any of the of any any of our strategies. So for products, it's all built through internal internally with our in house development team. When we've gone internationally, we are just using the same products hosted in the same infrastructure with that and from the same team in The UK, largely in The UK. So there's been no need to make any capital investment there either. So we're not really in capital intensive at all as a business.

17:54 And then actual cash has moved quite a bit in the period just because of the timing of some operator payments. It's not to do with anything else going on in the background. Thank you, Michael. That was a whistle stop at all of our finances. I'm gonna just cover off the international expansion as a as a business as we go forward, and let Michael, who is very much led on the product strategy for the organization under a COO role, talk a bit more around the products, which you'll see that totally befit into our international plan. When we listed on the stock market in 2020, we were very much a UK business, and we knew that. We had plenty of growth in The UK as we do today and as we've shown in the last year, with a lot of our core propositions being, with our existing clients continuing to grow, but also new clients that we can bring on into the market with what we're currently doing.

18:49 We knew that naturally as a business that we are a business that has no debt, makes lots of money, pays dividends, and sort of crosses the bridge as a fund as as a as a company of both being an income dividend paying business but also a growth business. But in our DNA, we are very much mindset of growth. And we knew that whilst The UK was fantastic, we always wanted to grow internationally, and it'd be another pillar of our growth strategy. And we've started to execute that. In 2022, as is well documented now, we went live in Ireland, which is now a a a significant contributor to our overall organization. We're delighted to say that we went live in Portugal in September, and that is very much plugging into the mobile operations in Portugal, talking to the broadcasters there, going live with one of the broadcasters there, and and and looking to expand that. Growing the existing relationship, which is paid for interactive services on TV and radio, using all the tools FONIX have built. It's all the same platform, all the same skill set, all the same dev team, all the same operational infrastructure that we have based out of The UK and exporting that. With the only real cost is that we've put in a country manager who, essence, account directs the supply chain from managing relationships with mobile operators through to working with the media organizations.

20:15 We're only seven, eight, nine well, coming up to twelve months, I should say, on that. And we have always maintained, and it's worth noting that we are beholden to the upside in the medium term. It takes us a long time to grow our clients to their full potential. And we're on that journey now. We're really excited by the opportunity in Portugal, and we'll continue to focus on that. In the meantime, we recognize that we want to look at other markets, we're looking for a few key things. First of all, a regulatory perspective, can you run interactive price draw competitions for broadcasters, and under what regulatory requirements are led to do that. And each one of these markets that we talk about, you can, just as we do in The UK. Switzerland came up with that, with with that criteria, and we approached the Swiss market. I'm gonna talk about them in a second because we have a case study, and we're really delighted to say we're obviously live with with two clients out there now.

21:13 France, we are not yet live with, but we felt that it was important to mention it on this roadshow. We for those of you that would have done any sort of digging and research into FNX will recognize that we have an entity in France, we've hired French people, and we are establishing a French business, and on that basis it's pretty obvious we are looking at the French market. We are and we are we only make money once we are trading with the mobile operators and broadcasters running services. And even at the beginning of that journey, we're never making the sort of income we want to be making that we tend to make in the long term. These things, in essence, sometimes say one to two years at least to get going. At the moment, what we are where we're at with the French market is we are in discussions with all the mobile operators and, in essence, being given the green light to go to contractual and API as an integration stage so we can have the capability to do what we do in the other markets, which is send and receive SMS messages and charge consumers on their mobile phone bill. At the same time, we're talking to a number of the broadcasters in the French market and and to establish a reputation for phonics and why we're good at what we do. There is a real opportunity in France. It has roughly the same population as The UK. The GDPs are parallel. The regulations parallel to The UK.

22:41 And it's interesting that the French market for paid for interactive services for broadcasters is circa a €100,000,000 in consumer spend, where The UK, which is totally comparable as I just said, is worth between 250 and £300,000,000. So there's clearly something that isn't happening in the French market that that we can leverage. We are really experienced having done this for twelve years in the one of the most established, mature, and robust markets in the world for this stuff in The UK to understand as we go into other markets where the opportunities lie. And we see French as a real the French market as a real opportunity in the future. It is obviously going to take us a bit of time to get there.

23:27 We are a British business trying to enter the French market. With that comes an an obvious sensitivity that we need to have the the the the right language, the right approach, the right or matches for what we want to do and and how our platform technologies will will integrate to that. So we're doing all those things, and we're really excited about the medium term opportunity there. We're not mentioning the six market yet just because, we are such a nascent period, but the the I think what it's safe to say is we are in connectivity stage. We are close to, agreeing in principle with a significant national broadcaster in this market, and we are hopeful to be an out to announce that in the in the well, certainly this financial year. We'd love to be doing that by the interims that we're live in that market.

24:19 Just touching on Switzerland. I think it's really important. We are ultimately running a niche business that, from the outside looking in, looks quite straightforward, but it's complicated. And I wanna just sort of put a bit of flavors into how does FONIX sit there and the leadership team sit here and go, right. Okay. How do we continue to grow our business from an international exploitation perspective? The first thing, as I mentioned a moment ago, is we look at the regulation. What markets in the world are we allowed to run paid for price draw competitions for broadcasters? And we are looking for regulation that's really clear that we can do that. And each one of the markets we work in, it's clear where we where we stand and what we can do.

25:05 The Swiss market gave us an opportunity to do that. What was interesting in the Swiss market, it was there was no SMS billing. There was no real premium rate. Broadcasters weren't really doing it, and we didn't understand why. And I think it's worth noting that if you look back over the history of paid for mobile carrier billing services, there are some amazing things that happen like the stuff that FONIX does for on all of its markets or certainly the charity billing or you can pay for stuff on your phone via Apple, through on the app stores or Netflix or Spotify or PlayStation. You can buy things with your mobile phone bill. On the flip side, there is we all remember Crazy Frog and, you know, sort of less content valuable subscription services that many markets, even The UK got caught up in this many years ago, and they got regulated out.

25:57 The Swiss took an approach about ten years ago to turn it all off, which was fair enough, I think, at the time because they didn't have any confidence in the market. We had spoke to all the, Swiss carriers at the beginning of this year and said, look. There is an opportunity in the Swiss market to bring high value pay for services back with broadcasters. They were incredibly receptive to the idea. Our credentials from The UK, Ireland, Portugal, thankfully sort of put us in good stead. And we then went and spoke to the broadcasters about what we do, how we do it, and and how we would approach the market. Needless to say, as we come into the year end roadshow, we have got two live broadcasters. You can see the comments on this slide.

26:43 We are very much in a growth phase with these guys where we're looking to expand, run services, on a on a continual basis, but on careful basis to grow consumer confidence and frankly grow confidence through the stakeholders from the broadcasters through the telcos that this is very consumer centric. There's piles of trust in this, and we can build a very sustainable business into the long term. And we're delighted with the results so far, and we're really looking forward to the opportunity moving forward. On the flip side of our growth strategy, I'm gonna hand over to Michael who's gonna talk about product. So as I mentioned at the beginning, we sort of have a dual strategy. So Rob just talked about our international expansion strategy.

27:29 The other the other avenue we we are pursuing in parallel is is how can we leverage a different additional growth opportunities through expanding and innovating on our product. And largely, that's looking to, in the short term, to generate additional revenue from our existing customers, but in the longer term, also expand into to to other markets or sort of neighboring markets that are good fit for the products we we've built. So there are three and in in order to do that, there are three main products that we've been focusing on. The bread and butter of FONIX's business historically has been in SMS. So that's a combination of short codes displayed on TV or read out on radio for a user to make a request to pay a broadcaster through an inbound request or an outbound SMS communication to the user's handset with the option for them to effectively buy something within their messaging app on their phone. So that's where we've built our business up over the over many years.

28:24 Over that over the last sort of five to ten years, it's been or certainly in the last five years, there's been an increasing movement from our customers to also promote online channels alongside the SMS avenue, which we've always been been involved in. And over time, we we estimate that some of our big bigger customers have as much as 25% of their audience and now engaged in an online environment rather than an SMS SMS channel. We do do some communications there, but we might send marketing messages to those users so they've signed up on a website somewhere, and we then are promoting that website to to on behalf of our customers via an SMS message. But largely, we don't really transact in that with those consumers. So there's 25% of our customer's CRM database that we're not transacting with. So it's if it's 25% of their database, it's likely to be as much as a third of our of the size of our own database.

29:15 So there's a good big opportunity there for us to grow our business. And what we've then decided to do is we focused on three very complementary products that allow us to gradually present new growth opportunities with our customers and new revenue for them, but also gradually, hopefully, allow us to to access some of those users that we're not currently transacting with. So the first one in the middle is comps portal. So that's basically an online channel or a website for a user to enter a broadcast competition, and we launched the product. We built the product over the last couple of years. We launched it in December 2025 with Channel five, a big broadcaster in The UK, and we've been live with them ever since. It's performing well, and we're constantly adding new fee functions to that. Alongside that, we have a number of other prospects in particularly in The UK market and actually also in international markets that are really interested in using this, rolling this out to their consumers as well.

30:06 So as well as generating additional transaction, it's been a very compelling, proposition to present to new broadcasters in international markets. It's also allowed us to build effectively tooling that we are then leveraging in other ways. So we are, one, tokenizing online payments, and we've integrated lots of PSPs to facilitate that product. And we're also we're also building sort accounts for users so they can register with an online environment and then have repeat transactions with a business. So that's the first thing we've done. The second thing we've done is we've thought about users that effectively get caught between SMS and an online environment. So they they might initially engage with us to make an SMS payment with a brand because they've read they've heard a shortcut code read out on air. But when they go to that pay make that payment, they get we get a rejection from their mobile operator.

30:54 And over the last few years, we've seen sort of rejection rates from an operators go up as high 10% of the transactions that we're trying to process get rejected, and they can get rejected for a whole whole stream of valid reasons. It might be the users on a corporate handset, and their handset doesn't allow them to charge their mobile phone bill. It might be that they have an inherent cap or bar in their handset that has been there since they started their contract, and it prevents them from charging premium services to their handset. It can often just be an temporary error from the mobile network that's not allowing us to fill that consumer. Historically, that user is then sort of left. We don't respond to them, and they have to navigate themselves to the online environment, online channel to pay and and enter another way. So what we decided to do is actually that's not the right way to handle it.

31:40 We have the user's intention. We have them in our we we know their we know their attention. We know what they're intending to do. We should offer them an immediate mechanic to pay another way, and that's what we've built with PayFlex. We immediately send a a real time response back to the user, and they can click to pay via Apple Pay, Google Pay, or card, or or or PayPal as an option. And that and we're converting for every message that we send to a user If we're getting up to 10% failures of those that we're then sending a link, we're getting recovering as much as 20%. And it's it was something we introduced gradually over over the financial year, so we we saw about 20% of the error message which was we're receiving that PayFlex link. We've now evolved the product, and we've onboarded more and more customers. We were we hope by the end of this financial year, a 100% of the error message will be getting a PayFlex link, and we expect to recover 20% of those. So it's completely new revenue to both us and our customers. That's the second thing we've been doing.

32:35 And then the third thing we've been doing is we've been thinking about how can we present a new channel or a complementary channel to market to to to their to their CRM database. So if they have a lot of online users that are used to using online payments, we wanted to introduce a very slick channel for them to receive an offer and have the option to check out via an online online mechanic that they're used to. So we've built this RCS messaging product, which we've called rich messaging. And RCS, for anyone that's not familiar, is effectively a richer form of SMS. You can send images and videos, but also you can send multiple calls to action and buttons to a user, and you can send embedded payment requests to a user. So instead of historically sending the that user to a website to then complete a payment, our vision of the product in the future is that we can send an immediate request to pay or purchase something without even needing to lead the channel. And it's something we've been exploring with customers over the last year.

33:32 We've gradually built out the product, and we're we we feel very confident over the next couple of years, it'll be something that we can gradually grow and grow and grow with our customers. Not necessarily just in the price draw space we're working in today. It could be a maze. It could be b o t b, any of those online competition businesses, or it could be other retailers where there's just an urgency for a user to need to buy something within a limited amount of time. The alternatives of sending email might not be quite the right fit because it's emails are crowded in space, and it's also not really great for time sensitive transactions. So it's something we're very excited about, and we hope to expand over the next few years in parallel to our international expansion. Thank you, Michael. I think we've rattled through that. I think it's important to sort of just to sort of recap as an organization.

34:20 Our existing clients have always underpinned everything we do. We work very, very hard to service those clients through our technology and support, and that's how we've created such a sustainable long term outlook business where we grow the business steadily. We're very excited by what's, you know, happened over the last couple of years in terms of our existing markets and client base have grown in revenue terms. We have, what we're excited by looking forward is that we have a clear international strategy, which I think, to be blunt, a couple of years ago, we were interested in, but we were planning on executing and had planned. But I think that some of that's coming to fruition now.

35:08 And furthermore, as Michael has just touched upon across our product set, the SMS interactive element of our business to a lot of people will feel like, oh, it's it's this stuff has been around forever. It's not a bit done. But to be honest with you, it's an incredibly powerful, ubiquitous, frictionless method of interaction that is still in is still the go to the the the bulk of any interaction when a broadcaster or charity runs these things. And the products we're looking to expand are providing, additional either ARPU possibility to drive the basket size bigger or to expand our capability of when a consumer might be able to engage with us, and we're really excited by that.

35:55 So, on that note, I think that might wrap up our presentation, and we will go to questions. That's great. Thank you very much for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions just by using the q and a tab situated on the right hand corner of your screen. Just while the company take a few moments to review those questions submitted today, I'd like to remind you the recording of this presentation along with a copy of the slides and the published q and a can be accessed via investor dashboard. As you can see, we have received a number of questions throughout today's presentation. Could I please ask you to read out the questions and give responses where appropriate to do so? And I'll pick up from you at the end. Okay. Thank you very much. So we will write us through these. I think we'll we'll try and cover as many as we can. There are a few. So we'll start from the top. See how we go. I think there's been a lot of questions about growth opportunity in the likes of internationally and what it actually means.

36:54 I think it's worth just we stated in the presentation, you know, we don't make any money once we're technically integrating and, or when we actually had an agreement with the a broadcaster. We only start making money once we're trading with them and actually once we get to and they then it starts to grow over time. So there's been a few questions about, you know, what is the opportunity gains, you know, what are we how much we're trying to gain in the likes of France or Portugal. I've noticed a few of you asked about constraints in Portugal, which I'll come on to in a second. But I think it's important to say we we look at the population of a market, and we look at what's being spent what what we see as the the addressable market. So you take the French market where we assume there's a 100 we we we understand from the research there, there's a £100,000,000 worth of transactional value.

37:45 If you look at the metrics of what's going on in The UK, we would holistically assume there's probably €5,000,000 worth of gross profit today to go after. Now it's obviously running through incumbents, and we're not necessarily gonna win it all, and we this would take us quite a while to get there. But I think there's two things we can do in the likes of France. We would grow that market because we see the opportunity, and we feel like, given our experience, we could take a large portion of that market. That is going to take time, and I think everything we do internationally is probably looking at just a three to five year horizon in terms of maturity, isn't it? So I think, you know, we will like to see revenue in each of these markets in f y twenty seven, and that will be good. And I think we will see that grow over f y twenty eight, f y twenty nine, and f y thirty.

38:35 But we can't really go into that much more specifics than that, but hopefully that gives a picture of the growth. We talk about a few few people have asked about constraints in Portugal. Portugal has just been is I wouldn't say it's been constraints. We are looking for the blend of commercial commercial drivers that the mobile operators can give us so that we can go and make sure that the whole value chain works so they can give away better prices, etcetera, etcetera. They're not used to they've never had a supplier like a FONIX going to go, okay. We need more of you, mister mobile operators, so that we can incentivize the market that can give bigger prizes away. And that's something that we've worked very hard at doing. That opportunity exists.

39:20 We're really happy with the way it started. As I said, the costs really there's been some opportunity costs in terms of our focus on integrating there. But apart from that, we have a a really great account director who's overseeing the Portuguese market with our support. Is contributing a really, you know, really material income to us on a monthly basis that is growing. And we hope to and we'll see the full year of that this year given that in f y twenty six, we didn't have the full year. It only started at the end of September, really. So we, we'll we'll see that, grow this year. So the yeah. The I think just to reiterate on that, just coming there's a question around what's the percentage growth rate in Ireland versus Portugal versus The UK.

40:08 In Ireland, there's been single sort of low single digit percentage growth over the last twelve months. So the delta is a bit sensitive to say exactly what we made in Portugal because we only have a single customer there, but the delta on that would would be our Portuguese operations, which has made a contribution. They've asked if something's happened in Ireland in the second half of the year. There is nothing that continues to ebb so all our services ebb and flow. Some parts of the year are bigger than others, and the customers just move around competitions at different times of the year. Nothing has happened in underlying has happened in Ireland that's says suggested anything slow down in h two. It's just, as I said, over the year, they've considered considered continued to grow at low single digit percentage growth. There's a lot of questions. Obviously, we have come out of f y twenty six with a certain number in terms of our growth, and I think there's a few questions about our guy the guidance from Cavendish now going back to lower growth, Michael. So I think Yeah.

41:03 Someone's asked why previously management said you are h two weighted. This doesn't hasn't been the case for three years. I don't know where that where you would have picked up that unless we're talking about calendar year at some point, but we have always been h one weighted, and h one being the second half of the calendar year. And that's because Christmas, the period running from October to December for all our broadcast customers is always the biggest time of the year. It's just there is there is consumers spend significantly increases on services up at that time of the year. So that's always been the case. I can't think of a time when that hasn't been the case. And then it was just that we're obviously this guidance that that that we're going back down to a smaller growth in The UK. I think Yeah. I think The UK is a really mature market, and there were a number of key drivers in f y twenty six that drove, in particular, that h two growth.

41:53 We're being we're very cautious and conservative. I think some of that growth has come through now. As And we look forward, that growth is gonna continue into f y twenty seven, which is fantastic. But it doesn't necessarily mean we're gonna get sustained growth at that at that momentum year on year. And I think we, being the prudent sort of business that we are, will continue to sort of guide carefully and try and over deliver if we can. There's a there's a mention of us only having 30% market share, but I think if you're looking at the Ofcom stats of carrier billing and phone paid services, yes, we are 30%. However, what is in that pool of 100% is one one eight services, o nine o premium rate phone lines, all the carrier billing that Apple and Netflix and Google do that the likes of Boku and Bangor provide.

42:53 So what I would say is in the interactive services provided to the broadcast and charity market, we're doing probably over 95 plus percent of it, if not 99% of it. And so we service all the major broadcasters for SMS interactivity that run it. And so, really, our opportunity to grow there is one or two businesses that don't do it, likes of Sky, the likes of Channel four, The Zone. There's a few other you know, there's a number of other media organizations that don't run SMS paid for interactive services, and of course, they're targets for us. But we would rather guide carefully, and if those were to come through, fantastic.

43:40 There is talk about budgeting in f y. Did we lose anything in France by not going live in France in f y twenty six? No. We we did with there was a couple of 100 grands worth of cost related to the French market in that year. You asked what's the budget for next year. It's a little bit sensitive to us income or budget though. We Yeah. Yeah. We so there was a couple of $100 lost last year. That cost is gonna mostly continue into this financial year. We are budgeting to hopefully get breakeven over the next eighteen months or so. It'll take us a bit of time because there is cost in in the French market. We're hoping to be trading in France by the end of the year. Yeah. We've got a financial year. Again, The market of states of Portugal are just just just time to market and and and some natural commercial things in terms of working through time lag with broadcasts, etcetera. So nothing to talk about there. I think it's important to talk about France's loss making. France's loss making is as far as we have one country manager and an account director as we establish that market.

44:43 So the rest of the investment to France is really opportunity costs that the leadership team are working through, our internal council working through the contracts with the carriers, and our dev team working on integration, but just like any other broadcast, any other market we'd go into. But it's a relatively modest cost currently that we gate at every stage, and we'll continue to spend that money whilst we see the French market coming on board. There was a question around why is there still no independent nonexec with international expertise a year after it was promised. I don't think we've ever promised to have a a non ex international non exec in place. We have committed that we will continue to try and find the right candidate, which we have. We've interviewed a few people. Unfortunately, the reality is we haven't found the right candidate yet for the with the right market experience. So we're looking for someone that understands your geographies, but more importantly, understands the broadcaster landscape as our preference.

45:43 And, unfortunately, we just haven't found the right candidate yet, but we do continue to try and find find people. Yeah. I mean, the next one was a question. Obviously, in the tax changes in the budget last year, tax, tax on gambling increased significantly, and about 60% of our gambling business left The UK market. So there's a question about how much gross profit was lost. It was I mean, there was you know, it was significant. It's really difficult to talk about, but, I mean, it was it was certainly it was material, but I think material all the while, but we there was nothing we could do about it. As the dust has settled on that, we're naturally trying to establish whether there's an opportunity to bring some of that back into the market, but, yeah. That's fine. So gambling was probably somewhere in the region of 6% of our business twelve months ago.

46:33 It's down to more like three or 4% of our business today. So there's been there has been it wasn't something we anticipated at beginning of the financial year. It's something we've had to carry, but luckily, we have been able to carry it within our numbers. And let's talk about our messaging growth between enterprise clients and media clients. I think the messaging growth is a combination of all of the above, and I'm not just trying to be avoiding that question. We we've been we've actually really had a had a good year in growing both our enterprise messaging business and our media messaging business. And when for those of you who might not understand what that is, it's we're sending a lot of outbound SMS messages on behalf of our media clients, and that's continued. That's grown well. On the flip side, we're very, very good at sending high volume messages to the mobile operators, hence why we do what we do. And there are international bulk messaging businesses. If you consider the this isn't the business we work with, you will know these brands, but the likes of Twilio or perhaps MessageBird, they're doing or even the likes of Cisco, they're doing messages across the world. And some of them don't have direct connectivity with UK mobile operators.

47:50 So they look for a local partner that they feel is high quality that's gonna give them what they want. Because we don't compete with those sorts of businesses, we naturally are are a decent home for them to consider using with us, and so we do do that. It's very price sensitive business. It's quite wholesale leads. It it ends. So it's it's good business for us. We have half a dozen or so clients that use us for that, but it can be quite volatile. So it's good business, and we continue to look after it. Someone's asked about our mobile operator fees, fixed fees. They saw the sum there there were some fixed fees that hit managed services, which I commented on. It says our operators renegotiating terms and when do the main operator contracts renew. So all of our operator contracts are perpetual.

48:38 Operators unilaterally can dictate pricing. And whenever there's a price change, we generally pass it through to a customer unless it's something sort of that we don't feel we we need to. The reality is that we are we are constantly trying to force negotiations with the mobile networks. One of the reasons that our customers like working with FONIX, another reason, is that we are always fighting their corners to try and get the best commercials in the market to make sure they can grow the services that they need. Because when when our customers sell more services, everyone in the value chain benefits. So we have very strong relationships with both the mobile operators and our customers to make sure we are always sort of negotiating and trying to get new tariffs in place. And that might be a new vertical that we're trying to drive transactions with. We might say, can we give a special tariff for that vertical, etcetera, etcetera. Right. PayFlex, which are the products Michael talked about.

49:27 There's a question here about what does it contribute today to the business, and is there a challenge that Apple Pay and car payments have higher or lower transactions than carrier bill carrier billing, and what sort of cannibalization are there? I think we've been working on PayFlex now for in earnest for about six months. Our clients have embraced it, in particular our UK clients, but it's something we can export across every territory we're in. The context of the £300,000,000 of the payments we're handling a year, as Michael said earlier, 10% of those have been failing, which means we've got 30 there's 30 more million pounds for the transactions we haven't built, and that is the addressable market today for PayFlex. It's different to saying, is it higher or lower in terms of take rate on carrier billing?

50:15 Whilst it seems really obvious, ah, FONIX, o two someone's sending a message to do something for £5 on o two, o two said to FONIX, you can't bill this user. And we go, I'll just use PayFlex and try Apple Pay. That sounds really straightforward, and I get that. However, in reality and in the background, we get something like 30 to 40 different error codes from some of the mobile operators that could be, you mustn't bill this user to, you can't bill this user, we can't tell you why to, they've run out of credit, they're out of range, to whatever it might be. There's an internal credit limit. And so we have to be really specific and selective in when we do and don't send those PayFlex alternative billing transactions.

51:02 The reason why I say that is when we go back to the client and say, yeah, we're gonna charge you $6.07, eight, nine, 10% for, for this, and they go, hang on minute. Car payment's only 2%. The they understand the complexity of what we're doing and the logic and everything we do. We're doing all this in real time. So, actually, we're not we we're not in a stage where we're we're actually capturing payments they would never have got. So the the the the challenge in our take rate isn't the the point here. We're we are generating more income that our clients could not have got because those payments had failed, and they understand we have built a quite complicated system that gives a really great consumer experience to hoover up those payments, which we're doing.

51:50 There's a comment on exclusivity with clients, and is it up? All of our client our client rates our client contracts are are always rolling with a with a generally with a a lock in period, but we're very embedded with our customers. So once we get through a minimum period, we tend to go into a rolling period, and naturally, we look to resign those. We we we that we've been asked about client concentration in one question here. We don't have we won't we don't give client concentration metrics over, but we, because it's that's very sensitive. We take payments, we take our share from the mobile operator, we take our share and we pass it to the the clients.

52:36 Our clients don't know how much money we make out of them. They obviously have an idea, and they don't know where they sit in our stack in terms of how big they are to us. Of course, they probably have an idea. So we but we don't list our top customers. I mean, it's pretty clear. Our focus is on the medium broadcast customers. They are our big clients. We're handling lots of traffic for them. And, you know, we have worked with most of our established major broadcast clients for coming up to ten years as a minimum, and, you know, we continue to look to do that. We're very embedded with them. We're we're we're very much in partnership with them, and we're paying them lots of money, and we would look to invest heavily on our side to ensure their services work seamlessly and can grow. So that's really the focus. Someone someone's asked, just related to that.

53:31 There are two stats that we give related to customer concentration, which is just to flag when anyone's not aware, is that we have three customers that are individually worth more than 10%, but for reasons Rob said we don't disclose who they are. And our top 10 customers represent 86% of our gross profit. So those are the two stats we give out. Not to signal to customers or competitors, we don't give any more information out than that, I'm afraid. Someone's asked about how, some of our customers adapting to the prize draw code that's been introduced over the last years. So there's a voluntary code that's been introduced for anyone who's not aware relating to the regulation of price draw competitions. The reality is that our customers in the broadcast space have been running these services for twenty years, and they've have well established their own codes of conduct through, trade association that we're all members of about how they should operate.

54:19 The prize draw code that's been introduced recently is to to try and really to try and address those people outside of the broadcast landscape. So it's the likes of Amaze and VOTB and other online price draw competition businesses where they aren't really under any regulation, whereas our broadcasters are very clearly regulated by Ofcom and restricts around that. It's worth not being aware and that that so that regulation is currently in a is in consultation with the government and it's a voluntary code and and some people have signed up to that code. Our broadcast customers are just sticking to the same framework that they've always operated for many years. I think specifically they they haven't signed up to the code Yeah. And they can't sign up to the code because some of the regulation in there is only directed at the online price for market, which broadcast market doesn't.

55:08 The broadcast the broadcasters are heavily regulated by Ofcom for this stuff. It is clear in price entry limits, in audit requirements, in what they have to disclose should there be an issue, pricing clarity, consumer harm. It's completely it is a super well established regulatory environment that doesn't get any consumer complaints and has been been nailed down for the best part of twenty years. And I speak, as a vice chair of AIM, which is our trade association for this market, with the CEO of AIM who is in contact is continuing dialogue with the DCMS.

55:57 And it's really clear that, actually, broadcast services are not really considered as part of this, this scope at this stage. So it's it's for us, it's not really something we address. Someone's asked, has there been any changes to the competitive landscape since you've launched your new products? I can't think of anything other than I think we've got a more and more cemented view that the product strategy we're pursuing is the right thing. There isn't really any new products that we've tried to launch over the past couple of years that have phased the way that I can think of. So we feel that we are making all the right decisions at the moment. Mhmm. Touch wood. And Yeah. There's a question there's quite a few questions about scale and how big can it be and, you know, are we at limit? We're certainly not at the limit. I you know, we've we've called out the markets we're in. The sixth market might seem a bit loose because I suppose some of you are going, oh, is this massive or is it tiny? I think that I think we we look for a minimum criteria, of course, of the amount of GP we could address.

56:51 And, you know, you know, we're looking for a certain amount of of of income from any effort like that. There are a number of markets that we've identified, not just across Europe, but outside of Europe, that we're not talking about talking about yet or talking to yet. They will naturally come across our bow in time. It's very niche. It's quite complicated, and it takes a lot of effort. We can't just hire 10 salespeople to go and do this, go out to a new market and do it. It's complicated. It is fraught with regulatory requirements. We've got an amazing senior leadership team of eight people with a, with a management team beneath that who is super well versed in this stuff. And when we go into a new market, we know exactly how to layer it in.

57:43 So whilst it seem might seem, well, why aren't you blowing the socks off this and going off to 10 markets at once? It wouldn't work. And we've seen too many spaces in too many players over the last twenty years in this space that think that's a big thing to call out. It's not. We would rather be we can achieve every one of our goals from a a shareholder returns perspective by nailing every market we've named over the next three to four years rather than putting any more markets on. And, actually, doubling down on the focus in the places we're at is a better strategy than going for a, you know, spread yourself too thin and not do anything properly. Someone's asking, are we continuing to invest in the new products? So I'd say of this sort of 60 people we have in the business today, probably 40% of those people are working on product. And and the main there is maintenance in all of our products. We have to maintain all the connectivity we have with operators and make sure it's upgraded for any security bugs, etcetera.

58:41 But they are all that team is largely working on new products, so we will constantly work on all of the new products that we have there. And we continue to work on our SMS product that we've had in in place for many, many years because we're looking to innovate and drive new new forms of innovation for our customers. Yeah. Right. We've got two minutes. One minute, two minutes. So, there's there's conversation about, you know, competitive landscape with WeChat, Alipay, I suppose WhatsApp. We would embrace that. We see them like a mobile operator. I don't think WeChat or Alipay are gonna enter the European market anytime soon. But, you know, of course, things like WhatsApp, RCS messaging, these are just rich Internet based messaging applications. So long as there's a payment you can see through PayFlex and RCS what we're doing, payments integrated with a much more feature of messaging solution is right up our street, and we would love to embrace that. And it actually allows us to go into other markets where there might be a WeChat or an Alipay in the fullness of time where actually you can go actually, we could take all of our skill set and go and approach broadcasters where that sort of product is really prevalent and look to to use that as our main telco, if you like, a way in.

59:52 Opportunities for other we're looking at podcasts, anyone which has got large audiences, of course, we're looking at that other than just traditional, state broadcasters. There's a question about ITV impact being taken over by Sky. We have seen no impact. I don't think they can announce it till next year. If anything, we hope there's an opportunity. You know, we mentioned Sky earlier in the presentation. I you know, that for us, to be able to run interactive services on Sky would be fantastic. Not saying that that's a conversation we're having, but that would be, great. And I suppose a final question. Are you personally looking to buy shares in the open market? We are we I am a significant shareholder.

1:00:39 Everyone of the management team is either a shareholder or a significant share options holder in the business. We are we've never done a frivolous sell down or had a rogue founding shareholders gone off and sold shares in the business. We are committed to long term sustainability and profitability. As someone said to us, we run the business a bit like a private company that happens to be on the stock market, and I think that's a perfect perfect description of how we like to run the business. And that probably is all the questions. That's great. Thank you for answering those questions you care from investors. And, of course, the company can review all questions submitted today, and we'll publish responses on the investor meet company platform. Just before redirecting investors to provide you with their feedback, which I know is particularly important to the company, Rob, could I please just ask you for a few closing comments?

1:01:31 Yeah. Thank you very much. I I hope that today we've sort of given you a good synopsis of the organization. We do cross over that, I suppose, somewhat strange place where we are, money making business that is very committed to continue that. We kick off cash. Don't need lots of capital to grow, and therefore, there is excess cash which allows us to pay dividends and continue to grow. We are conservative and modest in our approach, hence why it's it seems like a lot to us. We've gone from 30 people to 60 people over the last six years, and we've done alright so far, and we'll continue that mantra. All the while, DNA strategy for us is growth, and, hopefully, we've been able to demonstrate that. And, we look forward to what's coming up in the future.

1:02:20 That's great. Thank you for updating investors today. Can I please ask investors not to close this session as you'll now be automatically redirected to provide your feedback in order that the management team can better understand your views and expectations? This will only take a few moments to complete, and I'm sure it'll be greatly valued by the company. On behalf of the management team, we'd like to thank you for attending today's presentation, and good afternoon to you all. Thank you very much. Thank you.