Microlise Group (LSE:SAAS) — Full year results

0:00 Good morning, and welcome to the MICROLISE GROUP PLC Full Year Results Investor Presentation. Throughout the recorded meeting, investors will be in listen only mode. Questions are encouraged and can be submitted at any time via the Q and A tab situated on the right hand corner of the screen. Just click Q and A, scroll to the bottom, type your question and press send. Company may not be in a position to answer every question received 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 would like to submit the following poll. I'd like to hand you over to Nadim Reza, CEO. Good morning, sir.

0:31 Good morning, and thank you all for attending today. Just a quick couple of introductions. My name is Nadim Raza. I'm the chief executive officer for MICROLISE GROUP PLC. Been with the business for for quite a long time and have done a variety of different roles before becoming CEO when we did a management buyout in 2008. I'll hand across to Nick to introduce himself. Good morning, everybody. My name is Nick Whiteman. I'm the CFO for MICROLISE GROUP.

1:00 So I was appointed CFO in April 2023. Prior to that, I was FD, joined the business in in 2012, and been involved in a number of the key milestones in in MICROLISE's recent history including various different acquisitions and and took a leading role in the IPO back in 2021.

1:22 Thanks, Nick. Just a couple of slides giving you some background for those of you that are new to to MICROLISE. So we're a leading provider of transport management solutions to large enterprise companies. We sell to lots of smaller companies as well, but the the large enterprise space is is is where we really specialize and where our sweet spot is. And we help those companies solve complex needs with some of our proprietary software and hardware solutions. We help them by automating a lot of their critical processes and giving them that real time information throughout their operation. Our customers benefit from cost savings, reduction in emissions, and a whole variety of other efficiencies, which we'll talk about in a minute.

2:11 There are high barriers to entry, and we have a very, very sticky customer base and and very long term revenue visibility. Our contracts are typically five years, so hence giving that very long term visibility of future revenue. And we have a clear growth strategy, which we'll come on to later on in the in the slide deck as well. Just in terms of numbers, we've been around since '82. We have about 715 staff. We have about 400 of those large enterprise customers, as I said, but thousands of of smaller customers. We have deployments literally in every country in the world. It's easier to tell you the countries that we're not in. That's North Korea.

2:57 That's it. We all have systems deployed everywhere else throughout the world. About 640,000 subscriptions, we are a SAAS business, software as a service. And and as such, people pay us generally on a per vehicle per month price for all the different modules that we sell, and we'll talk about the different modules and our portfolio in a second. I mentioned earlier that we're very sticky with our customer base. We have a very low churn rate. It it's sub 1%. And for FY 2023, we turned over 72,000,000. We are award winning. We have a number of different awards including historically, we've won three queens awards for enterprise in 2018, '19, and '20.

3:53 Two of those for innovation and one for international trade. This is how we help our customers. So we help them by reducing the mileage that vehicles travel by optimizing routes and optimizing exactly what loads go onto what vehicles. We also monitor drivers and look at exactly how a vehicle is being driven. We have 31 characteristics of driving that we measure, and then we can tailor training down to an individual driver that specifically to improve their skill set, that per that individual skill set, the focusing on the areas that they need to to improve on.

4:39 Of course, if you're driving vehicles better and you're driving them fewer miles, then you also reduce the fuel that you use, and that also means that you reduce emissions. And and that's really what earns us the green economy mark from the London Stock Exchange. By driving vehicles better and and driving them fewer miles, you also reduce the wear and tear. So there is an improvement in in maintenance costs. And, of course, you have fewer accidents, and that also leads to a reduction in insurance premiums. Not unusual for customers to see 25% reduction in second year insurance following implementation of our systems.

5:27 Really, what we tend to do is help them improve the the efficiency and the utilization of their fleet assets, and that's drivers, trailers, vehicles, etcetera. So then that enables them to do more deliveries, more loads, more orders with the same number of vehicles and the same number of drivers.

5:53 Of course, we operate in real time, and we eliminate all of that delivery paperwork. And that means that that real time visibility goes all the way through to the end customer, and that enhances the the customer experience that they're they're able to provide.

6:13 These are locations around around the around the world. Obviously, we now, through acquisitions, have four offices in the in The UK, and then we have sales offices in France and in Australia, and our sales and development office in Pune in India just outside Mumbai.

6:34 So the highlights of f y twenty twenty three in comparison to f y twenty two, Revenue were was up 13% to 71,700,000. Recurring revenue was up 11% to 45,000,000. Adjusted EBITDA was up 15% to 9,400,000. We continue to to grow our ARR up 12% to 47,700,000, and that's reflective of the growth in subscriptions up to 640,000 worldwide, again, up 6.8% on on last year. Churn remained very low, nil point 7%, slightly higher than the churn rate for 2022 at naught point naught point 4%, but still extremely low for compared to the industry standard.

7:29 Cash was up slightly to 16,880,000, and we'll have some more details and color around the financials in next slide shortly. We're also pleased to announce our our maiden dividend that will be paid at the end of June at 1.725p per share.

7:57 Just to explain a little bit more about what we do, this is a slide showing the different groups of modules within our portfolio. We have lots and lots of modules, but we group them into into these seven categories. We'll start off from the right hand side here and talk about fleet safety. And you'll notice that the the orange icons there, they they're the different companies that we've acquired over the the last couple of years and illustrate which parts of the product portfolio they fall into or or actually contribute to. So fleet safety is is all about trying to reduce accidents and and deal with accidents when they do occur. So we have modules there such as incident data recording, bit like a a an air airplane black box recorder.

8:57 We also have bridge strike avoidance application. So if you're operating a lorry of a particular height, we can warn you if you're approaching a bridge that you can't get under. And, obviously, multi camera solutions. So we have cameras externally on the vehicle looking all around the vehicle and as well as cameras inside the vehicle, either looking at the load or looking at the the driver to monitor for distractions or driver fatigue. Then we'll move on to fleet performance. So fleet performance is what you probably understand as vehicle tracking and telematics. So people often compare us with other tracking and telematics companies. But as you can see from from this slide, tracking telematics is is a is a very small part of our overall product set, and it's really in this group of modules that, we provide that, telemetry.

9:57 And that includes monitoring of the vehicle and where it is, but also, things like temperature monitoring, door sensing, weight sensing, etcetera as well. Then we have a compliance module, which, again, covers all of the rules and regulations that you have to adhere to when you're operating a fleet of trucks. That includes the the historical recording of of any kind of maintenance and regular safety checking that you have to do on a truck as well as monitoring of all of the driving hours regulations that you have to adhere to as well. Excuse me. Then in the darker blue here, we have our journey management solution and connected driver mobility. So these two elements really deal with the execution piece of the portfolio.

10:48 So once you are actually

10:52 operating in day with a plan and trying to deliver a variety of goods. Lots of things can go wrong, and it's about making sure that you deal with those issues. If you're gonna get stuck in traffic or if you're gonna be delayed in making a delivery, being able to notify the customer automatically, that that, that that delay is happening, and also dealing with other scenarios such as

11:20 being not able to deliver because the customer wasn't there or or there was some kind of damage to the goods in transit. And then on the left hand side, we have our transport management system, which really made up of the two acquisitions that we've done in the last few months with Vita and ESS. They really form part of the the transport management system, which is which I'll explain in on the next slide in terms of what that actually does. And then planning and optimization, which is a product that we've developed ourselves internally over the last few years, which is all to do with planning the the loads, the vehicles, the drivers, and ensuring that you are doing your collections and your deliveries in the most efficient way using the least amount of vehicles, least amount of drivers, and and least amount of fuel and mileage to do to do all of those deliveries.

12:19 So I'm gonna go on and explain now a bit more about, the acquisitions that we've done in the last, period, mainly ESS, Vita, in the TMS space, and Flare, K Safe in the fleet safety space. So ESS and Vita actually operate in the transport management systems space, and and that really deals with the front end of of of how you deal with your customers in terms of quoting for work, dealing with order receipts, and and actually processing of those orders. So when you get some work in in terms of taking some pallets from place a to b, working out exactly how much you're gonna charge for that, you may have special rates with customers. You may also have special rates with subcontractors if you need to subcontract that work out to somebody else.

13:19 Dealing with that and deciding what the best way of of of dealing with that potential order and quoting for that. And then if that work is ordered, working out exactly the most efficient and cost effective way of of executing that order as well. Then there's obviously low planning. If you're running a multi depot operation, deciding which depot you might fulfill an order from or potentially fulfill an order from multiple depots, planning what resources you're going to use, drivers, vehicles, trailers, subcontractors in some cases, couriers in some cases, multimodal operations in some cases as well. And then, of course, dispatching that order and dealing with returns, redeliveries, in the case of failed deliveries, collecting the evidence of deliveries, dealing with any kind of any kind of additional costs that you may have incurred and how you're gonna pass those on to the customer, and, of course, then dealing with the the final invoicing and cash collection as well. So a whole set of functionality that is a great addition into our portfolio.

14:36 Then we come on to K Safe and their product called Flare. So they sell Flare to large enterprises that operate in the two wheel vehicle space. So on the left hand side, people like Lime, Tear, and Boy who operate, ebikes and e scooters. And on the right hand side, their customers include people like Just Eat, and Deliveroo who are operating the the last mile delivery, solution. And the flare business model breaks down into into two segments, really. On the left hand side, two companies that operate those large fleets of bikes, etcetera. They provide, loan worker safety solution, and an automatic accident detection solution.

15:33 And, of course, they do risk scoring, which, helps with, first notification of loss and also insurance cost reduction as well. So that's something that they sell to those large enterprises that run those large fleets of of bicycles and and and e scooters. And those are those are charged on a you know, the model there is charged on a per ride or a per journey basis. So, again, a a very much a SaaS, type offering. And then on the right hand side, the that data is also used in our more traditional truck space in providing, an application for truck drivers that, gives them, proximity warnings and hazard warnings relating to cyclists in close proximity and in blind spots around the truck.

16:28 So this is a an application that we developed, jointly with Flare over the last eighteen months, prior to prior to acquiring the business. This slide gives you a range of our, other customers. Not all of the customers are on here, but it gives you a view that,

16:52 you know, the the the wide amount of really household brand names that we operate with and across a wide set of different industry sectors as well. So a very diverse range of of customers and industry sectors. And, again, there's a link there at the bottom of the of the slide that you can go to to see further case studies if you're interested in understanding how we we help those different types of customers.

17:25 Some of the main highlights of 2023, obviously, we we acquired three businesses over the period with ESS completing just after the period in in the middle of January. We've been successful with cross selling and upselling those new products into our existing customers. We've sold four TMS contracts last year and also one to a a brand new customer as well. We've had really good growth in ANZ. It's our fastest growing region. And with the win of the Woolworths contract, which we announced a couple of weeks ago, one of our largest contract wins, that means that we have the top three retailers in in Australia.

18:16 And, again, we're hoping to replicate the success that we've had in the retail segment in The UK where we have a a 90% market share. We've continued to have accreditation for a great place to work for the second year. So we're proud of our employee engagement, and we've continued to have that very low churn rate, which has meant we've had over 40 major multiyear renewals with the likes of Bid Food, Palex, Tesco, Saint Bruce, and CEMEX. Traditionally, customers tend to renew for, five years, and it's also, an area and an opportunity where we are able to upsell additional modules into those customer contracts as well.

19:07 Over the last few years, we've also been focusing on that middle tier of of business customers. So for us, an enterprise customer is somebody with over 500 vehicles. But more recently, we've also been focusing at the sort of 200 to 500 vehicle fleet size segment as well. And we've had great success with that in 2022. We we onboarded 250 new customers in that segment. And in the the last twelve months, we've onboarded 450 new customers in that segment. So really good progress in that middle tier, of enterprise customers as well.

19:49 Where we've been making, further investments and we plan to continue to make investments in in 2024. Security is, is a is a big concern and and something very important to our customers. We've seen a number of logistics companies for victim to ransomware attacks and and not survive. And we've seen about five or six companies in the last year effectively going into receivership shortly after ransomware attacks. Fortunately, none of them have been our customers. And so it's something that our customers are very aware of and very keen to ensure that we are looking after their data, and that's really part of the reason why we've been spending quite a lot of money on improving our security posture.

20:46 Of course, we have, with our acquisitions, onboarded a number of new products, and that means that we are working on integrating those products into the portfolio in a in a very seamless way to provide a consistent customer experience. We're branding that product MICROLISE Complete, which essentially covers all of the different types of operations that a logistics operation would need functionally.

21:14 And so we're doing more work on that in 2024. Of course, we continue to innovate continue to innovate with new products. And another form another part of our strategy is to increase the number of third party hardware products that we support. We want to make sure that a large CapEx spend is not a blocker for a customer, in terms of buying our software, and where they already have lots of hardware in place that that that are working, we don't wanna force them into into having to replace that hardware with our hardware just so that they can use our software. So by implementing more support for third party hardware, we're gonna remove that blocker from them. We already support quite a few different third party products, but we intend to increase that support in 2024 and thereby increasing the software sales that will enable us to to sell into those customers.

22:20 I'm gonna hand across to Nick now to give some more detail on the finance side. Thank you, Nadine. So this this slide is is our recurring revenue cohort analysis, which shows that that we consistently grow customer revenues year on year. As we've pointed out in the headlines, we we have a very low churn rate, so customer retention is is very, very high. Existing customer revenue equated for around 98% of our total recurring revenues in in 2023. So what that does is gives us really, really good visibility for our forecasting and planning.

23:05 Obviously, we we expect growth to continue. Obviously, some of the initiatives that we've called out already in terms of integration of both existing and and further and of the recent acquisitions will will obviously give us the opportunity to cross sell and upsell even more and and make us even more sticky and difficult to replace with our customers.

23:31 In terms of our revenues revenue breakdown, we consider ourselves as a software company, but there are other elements to our revenue as you can see here. If you look at the graph on the right hand side, it is broken down into three main components. The bottom component in blue, is the is the software subscriptions. So that equates for around 63% of our total revenue.

23:54 Please say that's we've seen continual growth in in our recurring revenues over the last five years. It grew 11% year on year to 45,000,000. The orange segment is is the hardware. That that's grown around about 10% this year to 20,000,000. And the final segment is the is the services segment, and that's grown by around 46% to £6,800,000 in the year. The the services segment is broken up into two main elements sorry, three main elements. We've got professional services in terms of project management. We've got professional services in terms of integration work, and we also have engineering installations. What we saw in in the second half of twenty twenty three, you may recall in our in our half year announcement, we'd we'd pointed out that we had a significant increase in our on hand order book. It effectively doubled to around 10,000,000.

24:54 That really was a result of us being unable to deploy

24:58 new contract wins because of customer vehicle availability. That subsided considerably towards the back end of the year, and we really started to roll that out in in q four. So as a result, we did we saw quite a significant increase in in direct customer activity.

25:15 And what we tend to find with direct customer activity is they're normally retrofitted. So our engineers will have to go out and and retrofit retrospectively install to the fleet. And there's also other services like the project management that we need to effectively coordinate these installations because they tend to be quite large in nature and obviously quite complex because fleets fleets do move around quite a bit. So I think the other thing to point out is the we've we've continued to see very, very strong demand for our OEMs. So we

25:46 we saw a record year in 2022. We've seen another record year in 2023, and we do expect that to continue into 2024 and beyond. Just moving on to the profit and loss account. So we've covered off revenue that we saw overall, we saw a 13.5% increase year on year. Gross margin increased 16% year on year.

26:13 We saw increases in our gross margin percentage in both nonrecurring and recurring revenues. The nonrecurring revenues was we we we saw a move towards a greater proportion in in the second half of the year with the direct customer rollouts, as I've just mentioned. In terms of the

26:33 recurring revenues and the margins associated to those, we really put a lot of focus on on rationalizing third party services that we use. So within our products, we use things like map providers, obviously, airtime. We have mobile device management solutions, etcetera. We've got a lot of work into rationalizing those in terms of both from an operational standpoint and also from a commercial perspective. Overall, revenues sorry. Operating margins increased from 60% to 61%. So that that was impacted by a greater proportion of of hardware in in the second half of the year. So, normally, we would expect, you know, if we're seeing those kind of increases in in the recurring revenues, that margins would would be higher. But, you know, that that that's a consequence of of rolling out the order book that we had at the back end of the second half of last year.

27:31 Operating expenses increased 16% to 35,000,000. The vast majority of that was related to employee costs. So we've we've continued to invest significantly in our sales force, you know, and that's globally. We have sales forces in in in Australia as well as France and obviously The UK. We tend to split the Salesforce into two. So we have an account management team that focuses exclusively on existing customers and cross selling and upselling into those customer bases to get bigger share of the wallet. And we also have a dedicated team to win new business. In addition to that, we've we've obviously continued to invest in the product and development road map as well as security, which is obviously something that is going to be ongoing moving forward given the things that Nadim's pointed out.

28:26 Adjusted EBITDA increased 15% to $9,400,000 from 8,200,000 in the previous year. Margin increased slightly to 13.2 to 13%. Efficiency and margin enhancement is something that we are really focused on internally. So we've got programs of work that are going on in '24, and they will be ongoing into '25 and beyond. And that really is around making sure that our internal processes are streamlined and optimized and and where possible, automated to make the business more scalable so we can continue to grow the business without adding additional overhead. In addition to that, part of the m and a strategy that we've adopted is to really seek out high value software solutions.

29:16 So Vita and and ESS fall into that bracket. So, you know, the the subscription per asset per month is is very much at the very higher end, which will obviously will will go to drop down and increase margins naturally. In addition, those those two businesses are predominantly software. So, you know, there there isn't any nonrecurring services to to the extent that we see for the the wider group. And in addition to that, there there's the the integrations, third party products that Nadim referred to on the previous slide. The the Woolworths win in Australia that we recently announced was, you know, a testament to the work that we've done there. We rolled out a very successful proof of concept middle of last year, and and that was the precursor for the rollout across their entire fleet. And that was really around the the AI cameras and the anti distraction cameras that have been, received very, very well and proved to really solve the business case for the customer.

30:19 In terms of cash flow, we are a cash generative business. So we we converted 98% of our adjusted EBITDA into cash in the year. That would have been higher if it wasn't for a couple of customers paying us late in the year. So we we we had about 1,200,000 that that landed with us very early in 2024. So if we if we adjust for that, it would be around 111 percent.

30:47 We've invested more in the year in in fixed assets. So predominantly, that is around investment in the infrastructure. So within the data centers, but also within the internal business systems to

31:02 upgrade hardware. We have an ongoing hardware upgrade program that that is that we that we replace on a rolling basis, on a on a continual basis. But we've also invested additional funds into security. So network and and other safeguarding, firewalls, etcetera, is something that, you know, we're we're having to increase the level of capital allocation in that area, and we'll we'll we'll have to continue to do that in in in future years as well. I think it's fair to point out that the comparative period where it says a million pounds in fixed asset investment was abnormally low, and that that was really because the the IT sector was was suffering from the same component shortages that we've seen in in the vehicle sector. So it's a bit below base point, but I think the point is, is that we're going to continue to see CapEx levels that we're seeing here.

31:57 Intangible assets is really around internally generated software IP. So that that's increased year on year as as a reflection of the the integration work that we're doing with with the existing platform, but also the newly acquired platforms, and also ongoing investment again into into security as well as the infrastructure and and product road map.

32:22 M and A spend obviously has increased in the year to 3,000,000 from from the 1,000,000 in the previous year, and that is driven by by the two acquisitions of of K Safe in December and also the the beta software acquisition in in March 2023. The remaining 1,000,000 was the third and final deferred consideration to the the previous shareholders of TrueTac that we acquired in in March 2020. I think the final thing to point out from a cash perspective is is that we last week, we renewed our HSBC facility on more favorable terms. So so the margins and more effectively what they what they charge is to have the facility in place is is reduced. I think that's a real as a reflection of of the business', you know, strong credit status.

33:13 We took the decision to reduce the RCF from 20,000,000 down to 10,000,000, and that really was because we we feel that we we are able to generate enough cash internally to, you know, continue to invest in the in the key strategic areas. So but what we have managed to add into the facility this time that wasn't in there previously was the addition of an accordion, which means, effectively, we have access to approximately £40,000,000 worth of funds to support our strategic initiatives moving forward. I'll just, move on to the next slide, and I think I'll hand back to you, Nadim. Thanks, Nick. So just a couple of slides on on what's going on in our customer space and in our in our space as well. So what we're seeing in our customer's market is that it's still pretty competitive tough out there for them.

34:13 So they're continuing to look for ways of increasing efficiency and reducing their costs. There is pressure mounting in terms of net zero and reducing emissions. We have scope three reporting coming along and more activity now on accurately reporting emissions across different aspects of their operational businesses. Health and safety and compliance continues to increase. Some new standards and some new rules and regulations coming in in 2024 and next year as well. And our customers continue to invest in alternative fuels, so I've seen good growth in electric vehicle fleets and replacement programs in the smaller truck space.

35:04 And in the larger trucks, it's still very much diesel or diesel and gas. There are a few trials going on with hydrogen, but it's still very embryonic at this point in time. The important thing to say is whatever type of technology vehicle technology customers decide to to buy, we already support all of those, including hydrogen. And with regards to the other pressures they're facing in terms of complexity and and reducing cost and also emissions monitoring and health and safety compliance. That's what our products are geared towards. We can solve all of those different types of requirements that customers are coming to us with. And and we continue to work very closely with our customers and deal with any future issues that crop up as well.

36:02 In terms of our own operational environment, last year, at this time, we were talking still about component shortages and supply chain issues. We projected that they would diminish by the second half twenty twenty three, and we we saw that happen last year. We also said that the availability of new vehicles would probably be one to two quarters behind that curve. And, again, we're seeing that born out as well. And as we speak now, we're we're kind of back to normal levels of pre pandemic levels of of lead times on new trucks.

36:49 We're seeing some inflationary pressures coming through from our suppliers, but largely that's netting out through price increases that we're passing through to our end customers. And we still see very strong demand for our products, particularly with our recent acquisitions and some of our new enhancements such as the AI AI cameras where we've seen a lot of good traction in in other geographies as well as The UK, particularly in a and zed. So our growth strategy remains consistent. We we're continuing to cross sell and upsell into our existing customers. We're seeing good growth with our OEMs.

37:38 We are involved with over 35 new vehicle models for for launching later this year and the beginning of next year with JCV and a variety of new models with MAN trucks as well. When it comes to new customer wins, again, we're doing very well on that front as well with customer wins in in The UK and Ireland with people like McCullough, LF and E, Creed, PD Ports, etcetera, and international wins like Woolworths and Metcash in in Australia. And really good growth in that mid medium sized fleet segment with over 450 new customer wins in that space. And layered upon that organic growth, we have three acquisitions that we've done recently, and by no means, that is not the end of our m and a story.

38:34 We continue to look for for further opportunities for businesses that can enhance our product set further or give us a an increase in our geographic footprint internationally. And so moving on to the investment case. So as I mentioned earlier, we are a we are a SAAS business, and our typical contracts are five years. In fact, we have some contracts that are eight years and some contracts that are ten years. So, again, really, really good long term visibility of of future contracted revenue. That combined with, really low customer churn, again, no point 7% means that, you know, we are we are very sticky and really confident about our future forecasts.

39:30 We sell multiple products and a wide product set into into existing customers that makes us very sticky and also quite difficult to substitute. We've got further work going on in terms of margin enhancement with new products and improvements in our supply chain and our, direct customer sales. And there is significant market opportunity, particularly internationally where we're really only scratching the surface. And we've also got a a a track record of consistently growing. As you can see from the graph on the right hand side, we've had six years of of of consistent growth in our recurring revenues, and we're expecting 2024 to to be along similar lines.

40:20 And then moving on to outlook statement. As I said, we've had a a strong performance in 2023. Some of the headwinds that we've seen over the last two years with supply chain issues and long lead times on new vehicles slowing us down have have diminished. We have OEM customers with strong forecast going forwards and continuing to break volume records. We've we've grown significantly with a lot of new wins in the last year. And, of course, we should see some, accretive, revenue and and margins coming through in 2024 from the acquisitions that we've just completed in 2023.

41:08 So we're looking forward to an exciting 2024, and we're confident of meeting our market expectations. And with that, I'll hand back to Chet for a minute. Sorry. I'll hand back to Paul for a second. Fantastic, Nadine. Nick, look. Thanks indeed for the presentation. Ladies and gentlemen, do please continue to submit your questions just using that q and a tab situated on the right hand corner of your screen. Just saw the team take a few moments to review those questions submitted today. I'd like to remind you the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. As you can see, we've had a number of questions submitted throughout today's presentation. And thank you to all the investors who have submitted those. If I may just ask you just to click on that q and a tab and where appropriate to do so, just read out the question and give your response and I'll pick up from you at the end.

41:55 Okay. Thanks, Paul. So first question from Steven. With a focus on international expansion evident in recent contracts, what are the challenges? How big are the opportunities you see here? Is this a case of just a sales function reselling core product? So in some cases, in some geographies, that is the case. Australia, obviously, we don't have issues with language in compare comparison to France, but there are product enhancements that we have to do. Australia, for example, still a different currency. It has five different time zones where, you know, operations have to deal with the with deliveries, etcetera, that go across time zone boundaries. There are different types of of transportation, particularly with large truck trains that they have with with multiple boxcars on the back of being pulled by the same tractor unit. So there there are a variety of differences, and so localizations is an area that we do invest some r and d spend in into to make sure that our products are appropriate and solving the problems that that exist within a particular geography.

43:17 Sometimes we have to do more of that than in in other areas. So Australia, we have to do some. France and and in other parts of Europe, we have to do a lot more because there are a lot more variety of different types of transport operations in in in those regions. But generally speaking, it it's about having more salespeople on the ground, and they have to be local within country to to be able to go off and and make those sales. So that's why we're continuing to invest both in our sales and in our marketing in each of those regions. The next question from Ben was to do with says, you look to have increased the pace of acquisitions in this. Is this something we can expect to continue versus organic expansion? I think we remain consistent with our view on m and a, which is that it's important to make the right deal.

44:13 And that means that that, you know, the product set has to has to fit. The cultural aspects of the business have to fit. The numbers have to have to fit, and it has to tick those important boxes of, you know, does it enhance our product set? Is it accretive? Does it enhance our geographic footprint in some way? So there's a number of things that have to be right for us to to proceed with a with a an m and a deal. So we I can't I can't say I can't sit here and say that we we're gonna do five or six in the next year. I I don't think that's that's appropriate for me to make that kind of comment. But what I can say is that we are still very much active on the m and a front, and we are looking for businesses that meet our criteria. And our criteria hasn't changed, and and, you know, we'll we'll continue to look for businesses and make sure that we are doing the right deal rather than just a deal.

45:22 The next question is from Andrew. It says, what rate of organic growth does the company believe it can achieve given the large number of enterprise customers? Is geographic expansion required to achieve this? What operational leverage does company exhibit and what are implications for EBITDA margins? So a few different points there. I think the first point is that we believe that our organic growth can be better than we've seen in 2022 and 2023, and that's really given that that we had a number of headwinds over those periods. And and so we are focusing on on on improving our organic growth in 2024. I think that it's going to be a combination of geographic expansion as well as more wins in The UK.

46:15 So I think both of those things will apply. And in terms of operational leverage and implications for EBITDA margins, so we are very focused on increasing our EBITDA margins. We know that they can be higher, and part of that is the consequence of of the mix that we sell. So hardware obviously has far lower margins than software services. And so where we sell lots and lots of hardware, particularly to OEMs particularly towards the end of last year direct to customers through the back of orders that we had, that tends to be depressed margins.

47:03 The the work that we're doing in investing in high value, higher margin product and selling more of those combined with support of third party hardware so that we can implement our software without having to sell new hardware to the customer. All of those things will help increase and grow our margin. The next question is on share based payments. And, Nick, I don't know if you wanna answer that question. Sure. Yeah. I can pick that up, Nadim. So share based payments seem seem an issue for me as a shareholder. Can Can you you explain fully what these what these are and who they're for? So the there's a long term incentive scheme in place for the executive team and the senior management team, which consists of eight people.

47:55 So there are share share options issued. What the strategy is that we'll that we'll issue them each year for for those individuals. They are based on two main performance criteria, which are total shareholder return. So effectively, that is that is share price, and obviously, now the newly introduced dividend as well. But we've also introduced a carbon reduction metric as well. So 90% of the recent options are allocated to share price performance, and 10% is the carbon reduction target. They've increased because, effectively, what we've done since IPO is is issued a set of options each year. So because they are there's a three year vesting period effectively, we we've we've kind of done one in '21, one in '22, and one late in '23.

48:49 And then effectively, the the ones that were issued in 2021 will now drop off. So in essence, what we're saying is is that that that share price that the share based payment charge should stay at a similar level to what it what it's what it's now at. I think it's important to say that this isn't a cash payment. This is purely an accounting payment based on the options. Okay. I think next question is from Neville about the splits of revenue growth between price and volume. I don't think I can give you an accurate figure on that, but I'd say the majority the vast majority of the growth was down to increasing volume or selling more to existing customers or new customers rather than just a a price increase coming through. Okay. If I can just interject on that. So effectively, we're we're seeing of the 11% annual recurring revenue, around 3% of that 11% will be down to price inflationary increases.

50:02 Okay. Next one's from Thierry. Why don't you expense your software development costs rather than capitalizing them to provide a better view of your EBITDA? I think it's fair to say that a large majority of our development is actually expensed rather than capitalized. I don't know if you wanna say any more on that, Nick. Yeah. Well, under the international financial accounting standards, you you have to capitalize development costs. You can't expense it. So that's predominantly the reason why why we why we capitalize it. Okay. Another question from Terry. Could you please comment on your pricing strategy on your various modules? Yeah. So it's it's it varies a lot across the different modules.

50:47 Obviously, as I mentioned earlier, on the ones on the right hand side picture that you saw I'll try and go back to it Here, the the ones in the lighter blue shade are heavily commoditized. There's lots of competition out there. Lots of people doing similar sorts of things, and they've been around for fifteen years or so, those particular modules. So, you know, that that solution space is very well served. And so those, you know, products you're looking at anywhere between sort of 5 and £15 per vehicle per month as a price, whereas products on the left hand side, the planning and optimization transport management system side, In the market, you're looking at, you know, between 50 and £100 per vehicle per month type pricing for some of those some of those modules. So, again, you know, we're investing very much more on the products on the left hand side and bringing more of those types of products to our portfolio, thereby enhancing our top line and or also our EBITDA margins.

52:02 Okay. Next question from Darren. Please, can you comment on the average fleet size and difference in margins, etcetera, of winning contracts with smaller businesses? Smaller businesses tend to have higher we you tend to be able to, generally speaking, sell them at slightly higher price. However, the cost of sales is also fire far higher in portion of rep you spend as well. So there are particular sizes of fleets that we just don't go down to. So it's very, very unusual for us to directly sell to anybody sort of below a 100 vehicles. We do have effectively OEM reseller channels and a couple of other resellers channels where some products are sold to smaller fleets.

52:54 But but, generally, we tend to operate in a 100 vehicle fleet segment and up. Gary asked, could you please comment on the go to market and direct and indirect strategy? Most of our in most cases, we operate something direct to customers. There are a few resellers for certain products, particularly in the fleet compliance space and in the fleet performance space. But the products like planning and optimization and TMS and doing the management drive, because we tend to sell direct because they're not very easy for a for a reseller to sell on. Most resellers sell the simpler product on the right hand side of this slide.

53:42 Darren asks, what's the impact of this CapEx spending on security firewall, etcetera, and how will this change over time? I'm just conscious of time, so I'll quickly give you a simple answer to this, which is that we we expect to continue to spend in in in that security area this year. We don't expect the and be higher than it was last year. But, nevertheless, you know, we are we are continuing to invest in that space because that's what our what our customers expect with us. Next one from Darren. Do all new contract wins require hardware updates, and what is the split in new hardware and the use of third party hardware? No. They don't require new hardware.

54:28 In a lot of cases, particularly where we're renewing, customers tend to reuse the continue using the hardware that we've already supplied them. We support hardware for a very long time. I'm talking eight, nine, ten years. Usually, our hardware outlast the vehicle itself. So, yeah, we we, you know, we continue to find its support for hardware quite a long time. The exception to that is in handheld devices, and that's really down to security concerns. Android operating systems that are deployed on them don't tend to offer security patches beyond sort of five or six years. And so that really tends to be the reason why customers have to replace handhelds, but a lot of our other sensors and other devices tend to last a very long time, and as I said, tend to outlast the actual vehicle itself.

55:24 Another question from Thierry. Are you sure that saying you are a SAAS business is the best way to stress you have a strong recurring revenue base? Well, I think by definition, we are we are, you know, we are a we are a SAAS business in terms of the way that we sell things. We are we do sell them as a service and consistent to other software businesses. We tend to sell either by licensing by vehicle, by by person, by driver. And there are a few parts of our product portfolio that is done on a per order or per transaction basis. But essentially, we we host all of our software, and we provide it as a service to end customers.

56:10 And hence, we tend to describe ourselves that way. And we are very focused on growing our recurring revenue. That's also important to say that we expect that to continue to to grow successfully as it has been over the last five, six years. I think just going through some of the other questions. I think a question from Bill, how much of your revenue is generated outside The UK, and why are you concentrating on countries on the other side of the world like Australia rather than potential clients in Continental Europe. So it is quite difficult to look at our statutory accounts and look at exactly how much of our revenue is is generated outside of The UK because a lot of our deals are with UK companies that then deploy our software and solutions internationally.

57:02 Nick, I don't know if you can give a statutory figure for The statutory number's around 8%. It's international. Yeah. And and 92% is is UK based. Yeah. Yeah. I think in in in reality, the international revenue is probably higher than that if you actually looked at where where we're actually deployed, but that's the fast three number. The reason why we ended up in Australia is is is mainly twofold. One, it's English speaking and and two, a lot of our retail contacts from The UK have historically emigrated over to Australia and run businesses like Woolworths like Coles. You find that some of the senior management in those organizations are people from The UK who have immigrated over there, who have been looked at those businesses and said, well, you should just be deploying these tools that, you know, that they've already deployed very successfully in The UK market.

58:01 And that's really the reason why we've ended up in in those geographies. But but that's by no means to say that we aren't interested in in Europe. We absolutely are, and and we continue to see Europe as being a a great opportunity for us going forward. I think that's the end of the questions that we can we'd cover at this time. So back to Paul. Fantastic. Thank you for taking so many of the questions and thanks to all the investors for submitting those. And, of course, the company can review any further questions that submitted. And we publish responses where appropriate to do so on the investor me company platform. And before redirecting investors to provide you with their feedback, which I is particularly important to you and the company, Nadine, could I just ask you just for a few closing comments, please? Yeah. So firstly, thank you everyone for attending the presentation. If you do have any further questions, then you can reach us through a number of other means.

58:51 And, yeah, we look forward to an exciting twenty twenty twenty four, and we will obviously update you further with our half year results in coming months. Fantastic. Nadine, Nick, thanks indeed for updating investors today. Can I please ask investors not to close the session as you're automatically redirected to provide your feedback in order the team can better understand your views and expectations? This will only take a few minutes to complete, and that's greatly valued by the company. On behalf of the management team of MICROLISE GROUP PLC, we'd like to thank you for attending today's presentation. That concludes today's session, and good morning to you all. Thank you. Thank you.