Mind Gym (LSE:MIND) — Investor Presentation

0:01 Good morning, ladies and gentlemen, and welcome to the MIND GYM PLC Investor Presentation. Any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review your questions submitted today and publish responses where it is appropriate to do so. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful for your participation. I'd now like to hand over to CEO,

0:33 Octavius Black. Good morning. Hello. Welcome, and thank you very much for choosing to join this talk about MIND GYM PLC, which, of course, we weren't when we started in my kitchen almost twenty two years ago. Oh, I my name is Octavius Black. I'm the CEO and cofounder, and we have built this business up into a glorious new adventure, which I shall share with you shortly. Rising it from the start in 2021 2001 and floating on the AIM stock market in 2018. We are a behavioral science business. Now what this means is that we look after organizations, who are looking at how do you improve and increase the performance of their people.

1:20 And, traditionally, this has been done using hard power, pay benefits, or threat of job loss. And where we come in is using soft power by appealing to the core psychological needs that we all have, the need to feel cared for, to need to be noticed, to feel that our work matters. And increasingly, organizations are realizing that hard power has if so much as it ever had a great effect, it is diminishing. And what people need is soft power. But their concern to date has been how do I harness soft power, and how do I know that it's going to work? What behavioral science does is it helps us understand using controlled trials and peer evaluated research what kinds of reactions you get to what kinds of stimulation. And, therefore, what can we do as employers and large companies to shape the culture, to change the way we lead, to alter a whole range of dimensions around inclusion and ethics and well-being in order for people to want to choose to work here and to flourish while they do, therefore increasing productivity and performance.

2:24 So that in a nutshell is the overview of MIND GYM, in as we enter our twenty third year. My name is Octavius. I'm joined today by Dom, who's our chief financial officer, and we will be giving you an overview, first of all, of the market and the business, secondly, of our trading results, and thirdly, and most exciting of all, of the strategy and our opportunity to create a really market redefining proposition. So I'm gonna go straight into talking a little bit about the market, which is vast for human capital management as it is sometimes called. It's almost certainly in the trillions of dollars. We put down here the corporate learning and development market, which is in the region of $370,000,000,000, which is larger than the GDP of New Zealand.

3:11 It is a massively disaggregated market. There are no market players with as much as 1% of the market. There are more learning developments in HR consultancies in The UK than there are hairdressers. So you give a sense of this massively disaggregated market, which is still predominantly live, predominantly delivering workshops of one sort or another, either live in person or live virtually, but with a growing presence for digital. And there what there is in the by and large, the marketplace is people who either provide live or provide digital, but don't necessarily integrate them together, which is the first clue for where we may be going in sharing with you our strategy. But before we get to that, a brief story of our financial results.

3:58 Up until COVID hit in February 2020, we had a CAGR of twenty percent, And as you can see, healthy profits. We were, of course, affected by COVID in much the same way as all businesses whereas our clients focus rightly on the priority of operational effectiveness and moving large numbers of often white collar workers from offices to working from their homes and much else besides. But we're really delighted that last year, we bounced back ahead of our pre COVID level, and we are obviously on track this year for returning in these broadly in the direction of growth that we had previously enjoyed. So we are rebuilding the business and developing it and changing it at much the same time. We have continued to invest in growth, some of that through OpEx, quite often through CapEx, and we'll explain how that works.

4:46 And we will also be cash positive. We have no debts at all, though we have a lovely facility just in case of another rainy day, god forbid, and we are in a healthy financial situation. So a bit of about more about what it is that we do. Firstly, we publish research that is proprietary, developed by our own team of psychologists on the key issues of the day, matters that all organizations are facing but don't quite know what to do in order to have the biggest impact. So we take, for example, performance or performance management. We've written a research paper on reinventing performance management, how to achieve more with less forever. And we do that not by changing the performance management system or the rating scales or all the things that companies tend to look at, but by identifying the six conditions for high performance, the sense of purpose, feeling that my work matters, or the sense of growth that I'm mastering skills that are important to me. And then we help organizations in order to develop those conditions as much as possible for as many people as possible for as long as possible.

5:52 We launched much of this work with Microsoft when they originally removed ratings a decade ago. We've since used the intellectual property for a wide range of organizations, Maersk to MetLife, to Lloyd's Banking Group recently, and to many others who have seen the power of behavioral science as a way to generate performance improvements and indeed more contented and engaged employees. The same thing applies to diversity, equity, and inclusion. It was ten years ago that we originally said that unconscious bias training was suspect and probably wouldn't deliver the results that people wanted. And we've come up with alternatives and shown how using our four cornerstones, you're far more likely to reduce polarization, increase inclusion, and harness the the the dividend of diversity, diversity of employees, diversity of thought, and diversity of experiences.

6:47 So this is where we start. Unique IP showing as a behavioral scientist how you would deploy your resources in order to achieve outcomes that are important for you and for the talent in your business. The next thing we then do is productize that behavioral science in a range of experiences. Some are live, some are digital, and some are digitally enabled. They're they're virtual. So we created ninety minute workouts and slightly longer things, sort of ones called go largest, but for large audiences. They're delivered by our certified coaches. So all associates, but are certified in MIND GYM. And they are in 40 countries across the world, and we run up to 500 live either in person or virtual courses a week. And these are all complemented by digital eworkouts that are usually SaaS or commercial arrangement, a library of 70 or growing to about a 100 that are available to download and self serve.

7:44 And then we've recently launched, and we'll tell you more about that in a moment, our one to one offer. So this is about coaching, but, again, not coaching as people have known it. We've done the research to show what impact on performance most coaching has. And the answer is it varies a lot, but the average is quite low. But we've also done the research to show what coaching would make an enormous difference, and we developed a new methodology called precision coaching, and we'd be bringing that to life shortly. And that's delivered through our new digital platform, which is supports our product performer. And then behind the scenes in all of this, we have a library of unique assets, and no one's expected to read these off the the chart. But to give you a sense of the range that's involved from from relaxation techniques to sort of stress to inspire and motivate to creativity for logical thinkers and courageous conversations, great feedback, and business brain, and many, many more. And these are IP that we've generated.

8:41 They are formed as existing workshops, usually bite sized ninety minute, sometimes the sixty minute go largest. And they're designed so that anyone in the network of coaches who's trained in it can deliver broadly the same experience anywhere in the world, but adapt it culturally. So if you want to run influence and persuade in Missouri, Manila, Manchester, and Mombasa on the same day, You absolutely can, and many multinationals do. And the the course will be broadly the same with the same outcomes, but will be adapted to local circumstances by the live local coach who who makes that relevant and brings it to resonate. And so that becomes the core of the businesses is today. Live workshops, diagnostics, digital workouts, and also we wrap around it a series of customizing potential with our team of psychologists and graphic designers.

9:34 So that's the core of the business. I'm gonna pass over to Dom now to talk a little bit about the half year results before I come back and tell you a bit about our exciting strategy.

9:43 Thank you very much, Octavius. So it's nice to meet you all. Just briefly introduce myself, I'm the CFO at MIND GYM. I've been here for just over a year now. My background is Unilever Reckitt Benkiser. I've spent time as a finance director over in The States working with a a sales organization there. And I've spent the last sort of seven, eight years now in the technology sphere primarily with Just Eat and MIND But onto MIND GYM, which is the most exciting business I think I've worked in. This year, we've had a great year operationally, strategically, and I'm gonna take you through some of the financials now for the first half. So in the first half, we've seen revenue growth of 11%, and that's 2% in constant currency terms.

10:35 What we've seen throughout the half is in improvement and progression. So at the start of the year, we had the impact of Omicron, which particularly towards the end of the previous financial year had reduced the number of meetings we could have, which had pushed out some projects. And that led to a minus 2% decline in the first quarter. Q two has, shrugged off most of that, and we're we saw growth of 6%. And and as we head into the second half, we're anticipating much faster growth coming through. One thing that I think is quite important is the FX impact in that number, so the difference between the 2% and the 11%. That very much feels like it's a long term impact. And, obviously, from a sterling perspective, that's quite a significant benefit to our business, which we weren't seeing last year.

11:29 Very importantly, you'll see the return to profitability there. So EBITDA now back to 1,900,000. So in the chart that Octavius showed you earlier, you will have seen the impact of our pivot to digital, our in grow setting up the business for much faster growth. And you'll have seen that there was something like 7,000,000 of investment in areas such as the people department, marketing innovation in order to set us up for this digital strategy. We're now starting to then see the drop down of revenue into profit and the impact of that coming through. So 1,900,000 EBITDA, which is up, 1,200,000 on last year. You'll see that PBT is only up naught point 6,000,000.

12:17 The differential there is that we're now amortizing Performer, our one to one digital coaching platform, which Octavius will come to later. As ever, we continue to focus on operating efficiencies and CapEx efficiencies, and you can see that coming through in CapEx there. So CapEx spend down NOK 600,000 on last year. Some of that relates to office fit out costs that were in the prior year comparison, but 300,000 of that is the impact of a reorganization which integrated technology much better into the business and has actually sped it up quite considerably. So the benefit of OpEx and CapEx savings coming through in our numbers. We'll come back to the product road map later as well. And then finally, that strong balance sheet. So we have something like 5,000,000 cash in the bank today.

13:13 We're anticipating that cash will continue to build as we head towards the end of the year. And as Octavius mentioned, we do have a GBP 10,000,000 debt facility, which currently remains undrawn, should we, for some reason, need it. But at the moment, we're not anticipating that we would need that. So those are the core financials. Going down a little bit into more detail, the regional analysis, you can see there the impact of FX on The US business. So underlying growth is more like 4% in The US. The EMEA looks like it's a small decline. Actually, if you consider the sales organization, which is the clients that are are run out of EMEA, the organization would actually be flat. But there are some of their revenues and a growing portion of their revenues that have been built through The S US because they had to be delivered in The US.

14:07 But broadly speaking, slow to medium growth in our regions in line with our revenue numbers. What is, of course, quite interesting is that there's that growing FX impact, the differential between The U. S. And EMEA. And that provides the opportunity that as we grow some of our oils, particularly those in delivery and in other areas, can be then sourced out of The UK. And so that's an area which potentially provides the opportunity to leverage FX and improve profitability going forward. That's certainly that's something we're looking at. We have a very diverse client base. So we have 80¢ percent repeat revenue there from from customers.

14:54 That's a fairly normal number. It did peak a little bit up last year. What's very interesting is that we also have a diversified industrial base. So as, you know, as we look at the the economy and potential issues surrounding potential recession there, There are certain industries, particularly retail and similar industries, where we haven't necessarily been that strong in the past anyhow, which are gonna suffer. But what we can do as a business is pivot very easily to other areas, particularly ones where we're strong, such as financial services, pharmaceuticals, and some areas of technology. So that is a huge advantage for us. What we might, see is that's that the largest accounts increases a little bit as we go forward. Not a huge amount, but the impact of some of the frameworks that we'll be talking about later will change those numbers going forward a little bit.

15:50 And finally, looking at product mix. Design and advisory is now back to normal levels at about 16%. That's what we've seen historically. So it's the prior year comparison was a little bit lower than normal. So nothing of particular interest there. One thing that is worth mentioning is the growth of in person delivery. So our business, 70% almost of what we produce is delivery,

16:13 which is live delivery. And historically, that used to be very heavily weighted towards in person delivery. So before COVID, you'd have seen 70% of our delivery was in person and only 30% virtual. Obviously, through COVID, that changed quite dramatically, and there was almost no in person delivery. We're seeing some return to that, and, obviously, the cost for that are a little bit higher. But from our perspective, it's actually a significant advantage for two reasons. One is financially, we actually make more profit for in person delivery than we do for virtual delivery on a per session basis. So the gross margin percentage might be slightly lower, but the actual absolute profit per per delivery is higher within person. That's an advantage. It's also an advantage strategically because as Octavius mentioned, we have nearly 400 coaches in 40 countries.

17:04 That is something that our competitors will struggle to to be able to do as well as us. So we have that ability to deliver live globally at scale. And whilst competitors might have found virtual delivery more easy to do, that is something that's an advantage to us. Going on to cash flow, you can see the impact there of trade and other receivables on the cash movement during the year during the half year. That is the impact of a primarily, it's the growth in revenues from q four at the start of the period to q two at the end of the period. There's also some FX impact in there. And there's also some unusual timings between within the quarter of monthly sales within the quarter. That has largely unwound already.

17:56 It's not something we anticipate being a long term change. Other working capital moments, you can see the impact of bonus there, which is the minus 1,600,000. And also, can see the spend on CapEx, which is actually lower than it was last year. So that's h one FY '23 closing position for cash. We would anticipate that growing from here to the end of the year and as the receivables unwinds and as growth levels continue to increase in the second half. And with that, I'm gonna hand back to Octavius, who's gonna take you through some of the exciting framework agreements, which are having a positive impact on our business. Great, John. Thanks so much. And to emphasize John's point about our confidence in the future, we're delighted to share three new framework agreements.

18:49 Now historically, mind you, account when in the in the million plus range, we'd be cock a hoop about it. But now I'd like to share three, one which is many times larger than we had previously secured, which is with a an energy company, is over twenty four months and is worth in the region of £10,000,000. It's a very important program for them about culture change and about leadership development. It's global in its reach. And already, we're seeing opportunities because they've been asking us to help in other areas linked to the leadership and culture, namely well-being, diversity and inclusion, and performance management. So this is a a thrilling even if it was just the only story to share, we'd be absolutely delighted about it. But it is there are others too. We have just won for the second time, an electronics games multinational.

19:37 The first one was also a 7 figure deal. This new one we've just won is worth about $3,000,000 over two years, and it gives us an enormous opportunity because it gets us into a a an adjacent business, and it also focuses on our ability to deliver at scale quickly really good quality. The third example is different again. It's a mining multinational, also our second mining multinational for a 7 figure amount. In this case, the issue is about bullying and harassment and inappropriate behavior at work. We have a very strong offer in the area of respect, and they have asked us to deliver this program globally quickly, including reach reaching far, far places like Mongolia and parts of Indonesia. So our ability to deliver live in person, psychologically grounded, but very practical advice to address behavior, it applies across all three of these very different capacities.

20:35 So hope that gives you an overview of what the business is today and how it's performing at the moment. But what is really exciting about MIND GYM and why I think so many investors have chosen to commit to the business and stay stay so strongly with the business is because of the opportunity that lies ahead. And so I wanted to share briefly our strategy, firstly, by explaining how organizations buy the types of services that we offer at the moment. So on the left hand side of the chart, you'll see what a typical enterprise organization has to deal with. They've got a whole range of different human capital and cultural priorities, and these are just a few of them. And for each of them, they'll have a whole range of different providers and suppliers, maybe a business school or two, couple of consultancies, a behavioral change company like us, a learning provider, and so on and so forth.

21:26 And as a result, there's an awful lot of noise going on in the system and a lack of coherence. So as the individual employee, I'm only receiving an untold number of initiatives and programs, but I can't quite work out how they all fit together or what I'm supposed to do that's most important. Or maybe I get conflicting messages. Well, on the wellness program, I'm told to externalize problems, but on the growth mindset program, I'm told to internalize them. Well, which is it? And therefore, you have people who choose to opt out. You also have the risk of significant waste. Courageous conversations might be designed and run for a speak up culture and ethics. It might also be used for account management of difficult class, or it might be used as part of performance management, designed and redesigned slightly differently for different purposes, often different divisions and geographies each time.

22:15 So not only is this ineffective, and not only is it costing more, but most seriously, there is no data. And therefore, it's almost impossible for organizations to know what is and isn't working and how to redirect investment. And it is completely impossible to mass customize to give the right solution to the right person at the right time. As a result, the total is unequivocally less than the sum of the parts. Our vision and the vision we share with many clients and are excited by this vision is to make the total more than the sum of the parts, and the keyword in this is integration. What we show on this chart here is integrating the different kinds of content. So what you learn as a manager consist is consistent with what you learn as a leader, is consistent with what you learn about being bathing with integrity, is consistent with what you learn about how to look after your own well-being and that of others. And it all flows together underpinned by core psychological principles.

23:08 For example, we know that increasing someone's sense of autonomy, feeling in control, massively increases both their energy and commitment and performance, but also their well-being and their ability to accept others. So we can design overall what we call a behavioral change platform ecosystem that integrates the content, that integrates the distribution channels, and most importantly of all, is fueled by data. And that means that we can serve the right content to the right person at the right time because on the platform of millions of people, there'll be thousands just like them. And we know what worked for those thousands, and therefore, we're much better able to serve them with that content. So this is the vision of the future. And so instead of organizations spending all their budget on hundreds of providers, they spend hopefully less because we can save them something by integrating with one or possibly two providers.

23:54 Obviously, MIND GYM's ambition is to be one of those key suppliers. Now that comes both in the content and also in the distribution channels. So we've got the one to many in the top left around 11:00, which we already deliver live one to many at but better than pretty much anyone else at a quality level out there in the market. We then launched our new one to one, which is really exciting, and I'll come to that in a bit more in a moment. Then there's on demand, which is our digital library of eworkouts, which is constantly being improved. Diagnostics, which is a new area for us, and I'm gonna come to that in just a moment. And nudges and clues and hints and toolkits that are in the flow of work. And, again, we have a range of those now. And all of those will be fueled by data in the outer circle there in order to each one benefits from the one before.

24:41 So the results of my diagnostic may then give insights to the coach who's coaching me, who knows a bit more about what my needs are before we start rather than start the conversation from scratch. And then their feedback on the session or my feedback on the coaching session then directs me to the right on demand assets that I need right now. So the opportunity to create this is incredibly valuable both for individuals and for companies. And throughout this, we'll continue to build and develop our relationships. We currently work with 64% of the FTSE 100 or have done recently and with 54% of the S and P 100. So we have these very deep, relationships with the many of the world's leading organizations. And that opens up the possibility of them rather than buying from multiple providers to buy from one, one they know, one they trust.

25:28 At the same time, we must continue to keep innovating. And therefore, we don't rest on our laurels and say, well, we've written these research papers on these topics. There are others that are on the way. We recently over ten years ago, we wrote a a white paper called the reorganization remedy, how to upgrade when you downsize. Given the current economic tailwinds, it may unfortunately be time to dust that down and refresh it. We've also got new new white papers coming out on well working again. More of that in just a moment. So we we we think this is the right strategy, and we're pretty confident that it is because, firstly, clients say they want it. Secondly, from a a investor perspective, it creates enormous long term value. It's renewable. It's it gives greater access to new areas because if we concentrate content already from the ecosystem, why create it if there's a new topic, go to somebody else? Why not bring in the people I've already got who are running successfully and use more data to create more mass customization and and more value?

26:26 And then there's also significant barriers to entry. Because once you're up and running and you're in integrated to an organization, it's a very big lift to boost to it even if someone else comes up with the ecosystem. And to date, no one seems to be. Partly because in the market there, as I said before, by and large digital providers or and or the live providers, but not the two together and not certainly integrated at the personal level. So the question is not network. One question is what is the the vision, and that is the vision, and that's what we believe is the colossal market opportunity. But then the next question is how we can get there. And so, therefore, I wanted to share a little bit of our product road map. I'm go in more detail on the ones in green. But at the core of the of the first row are digital digitally enabled products, our one to one coaching, our diagnostics.

27:13 And DXP, which is a a a a an internal name for digital user experience, but it's how we integrate the digital with the live. So there's a digital shadow that sits around the live event. So you have a digital experience before you go that primes you, digital experience within the workout that, you know, creates more data and digital follow-up that's customized to you. And then our diagnostics will also move from organizational to individual, and it'll bring it all together and integrate it in the behavioral change platform that I mentioned just earlier. And at the same time, we're innovating in content. We launched a new research paper on leadership. Leadership regained why leaders from the funk and how to get them out of it, which was very well received and contributed to our success with the energy company that I mentioned earlier, and there are more on the way.

27:59 So I'm gonna briefly talk about one of those, which is precision coaching, where there are a number of new platforms in the one to one coaching area, but we are the only one that's developed our proprietary methodology that's grounded in science and that all our coaches are qualified to deliver. And we did this because what we discovered was when you measure the impact of coaching, whilst people think the coaching has improved their performance by a whopping 76%, the mean is actually nearer to 3.4%. Many studies suggest there was no impact at all, and one or two even suggested that things got worse. But there are outliers. And so what we did was research what exists in the outliers. We went to hundreds of different research studies just from that invented or created using our team of psychologists and our academic board precision coaching.

28:47 And this is based on three parts above all else. One is solutions focused, which comes from solutions focused therapy, which is one of the most validated forms of psychotherapy. The focus is on the future. What does a a right sized goal look like, and what's a good enough outcome? Want I my team to be engaged, but they're not gonna be dancing down the streets or stopping strangers to say how brilliant my boss is. That that's unrealistic. So what's a realistic goal to get to? The second behavior enablement is the the gap between knowing and doing. With all things we intend to do, a new year's resolutions will be coming up shortly, many of us will make those and probably not stick to them if if the past is a good predictor of the future. But we've got developed is psychological techniques to help bridge that gap that greatly increase the chance that we'll apply what we know to be helpful. And the third area is mastery, getting really good at something before we move on to something else. And we've combined all these together to create a product which is called Performa because it's all about improving performance.

29:42 And it's based around four forty five minute sessions that are run virtually with a precision coach qualified coach, and then has digital experiences before and after to help diagnose, remind, refresh. And when we run this, we found that on thirty two percent of occasions, people received unsolicited feedback about how their behavior had improved and their performance changed, which is is incredibly rare to get three percent of people giving unsolicited feedback. So we're absolutely thrilled about those results and would like the clients who have already bought it are buying more and more licenses. That, again, is a very encouraging need indicator. We can then compare and contrast it with the rest in the market. And, again, we are the only one with the proprietary methodology, the only one with a coaching quality assurance that sits into it, and the only one that can integrate it into the rest of our solutions, the live workshops and the eworkouts, everything else to create a fully blended program.

30:37 The next I'm briefly gonna touch on, which is new for us, we're still in beta trials for this, but really thrilling, is diagnostics. By and large, what happens at the moment is organizations bring in someone who's an expert in diagnostics, then they get some results. They go, oh my goodness. What do we do with that? And then they try and work out how to structure it, form it, and who they should bring in to potentially partner with them. They run a RFP process sometimes. They then choose someone, hopefully, MIND GYM. We do a brilliant job. But by the time the job is done, the idea of evaluating the impact is long since it's gone. And it takes quite a long time to get that. With our new diagnostics, they're designed to be integrated with our solutions. And therefore, what clients will discover is insights that they can act on immediately. So the solution becomes part of the process, and then it's much easier to measure impact

31:23 afterwards. So we think this is a a significant change. It will redefine our relationship with many clients. It will make us a more of a strategic partner, and it will be end to end for the value chain. At the moment, we are we've got one client who's bought it, and we're running beta trials with them. We've done a couple of the beta trials in the pipeline, and we expect this to have a proven success in the coming year of y twenty four and then be a more commercial success in FY '25.

31:51 And then we're gonna talk briefly about our new IP in the area of well-being. Well-being is a $50,000,000,000 market at the moment, forecast to get to a $100,000,000,000 by 2030. Organizations spend a lot about it in it because they know how important it is if employees are flourishing and mentally healthy present, that adds enormous productivity and performance. What they sometimes don't realize is there are three factors that drive people's well-being. There's a personal factors. Maybe I'm born with a a tendency towards clinical depression or early in life. They're all the factors that happen outside of work. What I eat, how much exercise I take, whether my sports team won or lost at the weekend, and the status of my romantic relationship, my how I'm getting on with my children if I have them or my parents if they're around.

32:39 And then there's the life at work. Is my boss delight or idiot? Do my colleagues under my meal? Do they support me? Now

32:45 most investments take place at the borderline between life and work and life outside work. They're trying to nudge people to eat better and sleep better and so forth. And the research emphatically shows that this makes virtually, if any, difference. In one study, health care spending was the same for people who've been through eighteen months of well-being programs as those who had not. In another two years of well-being programs, the 5,000 people who did take part were no different from before in 78 out of 80 measures, including sleep, BMI, cortisol levels, as well as absentees and retention, so on and so forth. So by and large, what's there probably isn't getting the results the organizations want. What we've identified is the five psychological conditions that drive well-being. One of which, for example, is certainty.

33:30 The the more surprises I get at work, the mood of the boss that affects what happens that day, or the email saying, I need to speak to you tomorrow, and you have a sleepless night worrying about it, and then in fact, it's nothing at all through to a whole range of is the business strategy changed, my budgets get cut, and so on and so forth. So we help organizations think about how do you create those conditions that brings well-being into the flow of work. And this is a massive opportunity for us as a business and for our clients to get it right, and we'll be launching this white paper in the next quarter, our q four, ready to deliver solutions in the next year, f y twenty four. So in summary, we are feeling good for the year. Our outlook remains unchanged. There are some economic headwinds, notably in The US at the moment.

34:16 We are often the first to to adjust when they think things are getting worse, but also the first to bounce back when things are getting better. We have won these significant framework agreements that give us much greater confidence about future growth. We are launching all traditional diagnostics with our first clients, and we'll learn from that and grow from that. And we have brilliant new points of view in leadership, coaching, and well-being, which will fuel future growth. So we're we're really excited about this. We set out a strategy when we did the IPO in 2018. We're absolutely on track with that strategy. We are, with a slight disruption from COVID, on track with the growth that we were looking to deliver. And we feel very positive, excited about the business and and hope that you do too. And very delighted now to open up to any questions anyone might have. That that's great.

35:02 Octavius, Dominic, thank you very much indeed for updating investors this morning. Ladies and gentlemen, please do continue to submit your questions using the Q and A tab situated on the right hand corner of the screen. I just wanted to give the company a couple of moments just to look at the questions submitted already. I'd like to remind you that a recording of this presentation along with a copy of the slides and the published Q and A can be accessible via your Investor Meet company dashboard. Octavius, Dominic, you've received a number of questions throughout today's meeting. So firstly, thank you to everybody for your engagement this morning. If I may, Octavius, can I hand back to you just to perhaps host that q and a? And if I could ask you to read out the questions and, of course, where appropriate responses, that'd be great. Yes. Certainly. Tom has asked, what's the current headcount in the business? And how does that split between fully employed and contracted? And as you grow, what do you think you will need to add? Tom, do you wanna start off with some guidance on that? And I'm happy to contribute.

35:51 Yeah. Absolutely. So there are details on our headcount in our half year results. We have something like 330 employees in the business. Now that doesn't include our coaches who are self employed contractors. The contractors within that 330 are about 60 to 70. That number obviously moves around a little bit.

36:13 You'll note that that is down a little bit on prior year. We have focused on on OpEx efficiencies, and I I think I touched on that a little bit earlier, which which has reduced that number a little bit. But it's actually made our processes, particularly our technical side, a little bit more efficient and faster. Going forward, it's it's we will obviously need to grow headcount going forward. Perhaps a better way to answer that is to think about the drop down of our profits of our revenues into profit because most of our costs are headcounts anyhow. We anticipate on our core business that the drop down to profit is in excess of 30%. So something like 30 to 40% on our normal growth.

36:59 But saying that digital of is, of course, likely to be significantly higher margin,

37:05 particularly, you know, performer will be stronger margin than that we would anticipate. And then particularly things like eworkouts and pure digital such as organizational diagnostics, the margins on that are going to be even higher going forward. So, yes, we will continue to grow, but you should see leverage coming out from our numbers going forward. Fantastic. Thanks, Don, for sharing that. You asked someone's asked Mark about the how long is the process for securing these large framework agreements and how are they structured? Let me come to the structure first. In our world, in our market, there are very few legal legally enforceable contracts of long large tail delivery because the nature of the delivery can change significantly.

37:50 So what happens is the client says, this is our challenge. Overall, what do you think it would cost? We said, let's say, £10,000,000. They go, that's great. What would this overview framework to say, this is what we intend. And then we'll do statements of work for the individual pieces as they are delivered. So for example, the design of the program might be 2 or 3,000,000, and there might be statements of work for the different phases of that. Now it is extremely unlikely they're gonna spend 2 or 3,000,000 designing a program and then not deliver it. And you can imagine, in turn, there'll be quite a few questions asked if that were the case. So by and large, once they've designed and set up the upfront investment, the rest of the framework will be delivered. It's But a framework agreement, and therefore, it's

38:29 still open to question. We can't guarantee those earnings. Now we also have SaaS products like our digital eworkouts, and those are obviously committed to upfront for an annualized basis. So that the process for securing them is there tends to be our average buying cycle is around six months. It can be a lot shorter, and, obviously, it can be a lot longer, but the the typical is around six months. Quite a lot of work goes on in building relationships with CHROs as the head of HR, heads of learning, heads of diversity, heads of talent, as well as with CEOs and other business leaders in order that they know about MIND GYM. So when the time comes, they, a, invite us to contribute to the RFP process for framework and, b, know a little bit about us before we show up.

39:17 And as is the case of the energy company, where we had done a little bit of work before we worked in one of their divisions doing safety at one stage. The we also put effort in to get to know the key stake stakeholders across the business so that they invited us along. We were, in fact, seen as as the black horse, so no one didn't expect us to win because I had some big consultancies or incumbents. But they were really impressed by the intellectual rigor of our thinking, the quality of our products, the innovation of the team, the flexibility of the team, and therefore decided to award us the framework. The electronic games company that I mentioned actually was quite quick because they one of the things that was important to them was to

39:56 deliver lots of programs in a short period of time. And therefore, our ability to have proven products that they could roll out immediately and our client delivery team, which executes on them, make sure they they happen efficiently all over the world, made us a very appealing choice for them, and that happens slightly faster than the average. So hopefully that answers that question. You also asked the question, are regulation corporate governance requirements on a company drivers for your business? Do you have offerings to address specific areas that enable companies to comply with their requirements? And the answer to that is is a is a guarded yes. We wrote a research paper on ethics called the only way is ethics. Why could people do bad things and how to stop us? And that has been the basis for programs of the number of banks on ethical behavior and how do you avoid ethical transgressions.

40:46 And those programs have been commissioned because of issues with the regulator who said that the culture is not set up for ethical behavior. Some have been fined for significant missteps, and therefore, they're keen to change the ethical environment. And in one case, I'll give you an example of DataBank where the conduct survey was conducted eighteen months after the MIND GYM program, and people were seven or eight percentage points more likely to say, for example, that they would have followed the spirit of the law rather than the letter of the law if they had been on the program than if they had not. You start to see a sustained impact on exactly the kind of behaviors that regulators care about, and there's definitely an opportunity for us to do more in this space. Moving on. Sam says, given the weakness of the share price, why have you not considered buying back shares in the company for cancellation?

41:37 Well, you you certainly have a very good point about the weakness of the share price, and we have clearly a range of views about where where fair value might be. But one of the things that people have talked to us about is ensuring a sufficient liquidity in the in the in the in the market. And two thirds of the business is still owned by the founders, by me, by Seb, and by my wife, Joanne, who's also nonexact. So there's only a third that's already floated. If we start to buy that back, then the liquidity would become an even bigger issue. So we've taken advice on that, and the advice is to hold steady and let the market write itself. But that that's the reason why we made that decision. Can I jump in on that, Octavio? Yes. Please do, Don. Yeah. So absolutely endorse what Octavio has said. What I would also say is that we're very much focused on our our growth drivers, so on a digital growth. And if we want to move the share price, delivering on those, which we are we are doing at the moment is the thing that we believe will most transform that share price.

42:35 So that's that's our focus at the moment. Not and and, obviously, as Octavia said, we have we have considered this, but that's what we're focusing on. James has asked, what's the plan investment into RD, Dom, which I might pass to you? And then how do you protect your IP, which, again, you may want to cover? Yeah. Absolutely. So, obviously, there's there's a limit to what we can say exactly about our our r and d plans for the future. If you were to look at the market expectations, market expectations are for r and d CapEx spend to increase to about 8,000,000 next year. What I would and then that's from about 5,000,000 this year. What I think I would say to that is that we are also internally always focused on that efficiency. So in the h one of this year, you saw that the CapEx actually dropped versus prior year because of the efficiencies we've built into our organization.

43:27 And, of course, we're looking at different ways. We're looking you're always looking at other acquisitions we can find, which could be more cost effective, which would certainly could get us to where we want to go more quickly, and we'll continue to look for those going forward. And and there are other things you could consider doing, different org structures. You could look at offshoring. And, again, these are all things that we would we continue to look at going forward. Do want talk a bit about protecting IP? And how do you protect your IP? Yes. So we are obviously, we're quite rigorous about our IP and and protect you where we can. We take the appropriate advice where we can. We have very clear contractual terms. We have contractual terms with our employees. I I think that's that's that, you know, we we will get anything more to add to that. I just didn't add that what people are buying is the whole overall experience.

44:19 So it is obviously right. The coach could run one of our sessions of contractor coach. I mean, that's really interesting content. I use it in my own training. But their own training won't be anything like the experience we've got. It won't have a digital before and after. It won't be integrated into an overall program. So by and large, there may get a couple of snippets here and there. It's unlikely that it's going to be mass produced and recycled in a significant way that would disrupt our business. We also have clients who are, by and large, multinationals or big domestic organizations. Again, the reputation, the idea that they're going to take our IP and repurpose it and photocopy our handouts or whatever is unlikely because of the reputation damage that we do. So we do have legal covers, but we also have found over the last twenty odd years that people haven't taken our IP.

45:06 One, two steps when they try to, we've been able to do it quite quickly to prevent it. So hopefully, that answers that question on IP. Does your outlook vary by region, and where do you see the best opportunities? I think we we see The US as a massive growth market. It's an enormous market. It's relatively homogeneous, at least in the sense that everyone speaks the same language. And there are businesses that operate usually across most of The US rather than necessarily state by state. So there's enormous upside there. We also see The UK, which is our home market, has enormous potential for growth. So we're we're very excited about that. And we're also looking to Northern Europe, particularly to to Holland, Netherlands, Denmark, possibly Scandi as the first substantive beachhead outside The UK and Europe. And we already operate in all those countries as we do also in Switzerland. We operate many more than that, but we see those as as markets where we can particularly go after. So there's a is a variance amount by region. We think the economic headwinds in The US have been responded, as I mentioned earlier, more vigorously than they have so far in The UK, that that may unwind and go in the opposite direction.

46:21 You also asked the question, do we expect to return to 20% annual revenue growth in the future now we're coming out of of COVID? I mean, this year, we're clearly still very much affected by COVID because Omicron in the November, December, January, February meant that it was hard to speak clients, sales clients, do work with clients. So there was a tail effect in the first half of the year where growth was very much constrained, which we're coming out of in the second half of the year. We absolutely do expect to turn this level of growth as and when the digital products really take off. And we are confident that they will because of the market fit. When they do, we will be growing as a significant leg. So we feel very confident that growth will return quite how quickly it will return to that level. It's it's a little hard to tell, not least because of the economic headwinds that we are addressing at the moment.

47:12 Yeah. Can I just add one point to that as well? If you were to look at the longer term growth potentials of our market, obviously, there is strong underlying growth in our market. You saw that, I think, on one of the first slides. What that didn't mention is that actually the digital elements of our markets are growing faster. And so if a business were to pivot to digital, you would anticipate that there's more growth there, and it feels fairly obvious. I think one thing to point out as well is we do have a significant advantage. You know, we there are players out there in digital who can do digital, but they don't have the IP that's necessary to do the broader market and to do the whole package for their clients. And then, of course, there are people out there who can do some of the IP. They've got some of the content, but they don't have anything like a digital strategy.

47:59 And so to some degree, we are somewhat unique in that we have both more than twenty years legacy, all that come content that Octavius introduced you to. We also have a very clear digital strategy, and therefore, we can present that integrated package to our clients, which is hugely attractive and then then points to this digital growth being more relevant going forward as well. Thanks. And that's great. And do you wanna kick off on where can the EBIT margin get to in the medium term given the operational leverage that you've mentioned? Yeah. I I'll I'll talk about EBITDA margin if I may. So historically, we've had EBIT or EBITDA margins of around the 20% mark. There's no real reason why we can't go back to that. The the more important question is what will digital do to those margins going forward?

48:46 And, obviously, that depends on the size of digital and mix mix of that business, so I'm not gonna make predictions. What I would say is that you would anticipate, you know, certainly things like organizational diagnostics or individual diagnostics or or or pure digital sales to have a much, much higher margin going forward. But, you know, we're not make making predictions on that at this point. And I think that brings to the end the delicious questions we've had. Thank you very much for asking those questions. If there any more anyone wants to type in, please do. That's that's great, Octavius and Dominic. Thank you very much indeed. And if any further questions do make themselves available, obviously, we'll make those available to you post today's call. Octavius, I know and Dominic, I know investor feedback will be particularly important to you both, and I'll shortly redirect investors on the call to give you their feedback. But I wonder before doing so, if I may, Octavus, ask you for a few closing comments to wrap up with, after which I'll send investors for their feedback.

49:41 Yes. Thank you very much. And I'm delighted to talk about why I'm so excited about this business and why I, as a founder, a majority shareholder stay so committed to it because the market opportunity is vast. And the amount that's being poured into the human capital market from private equity and venture capital and other sources is enormous because many others see this market opportunity is there. So it is highly likely in this large growing profitable fragmented market that we will end up with some more dominant players. And we are pretty convinced that the solution or one of the solutions that will become dominant is the idea of the integrated behavioral change platform where data drives practical proven insights to the right person at the right time to affect the behavioral change that drives culture and performance in businesses.

50:28 The question then is who will become the leader? Who will become one of those? Will there be one dominant player like in search, or will there be several four or five, as I say, as our own streaming channels? And, again, that's impossible to know at this stage. But even if four or five, each one will still have a very large and significant share. That's the right direction. What I think is exciting about MIND GYM is why we are uniquely placed to achieve this. We're uniquely placed because of the IP that we have, both the ways of looking at challenges through a behavioral science lens, which is we are the only public quoted behavioral science company in the world, and also our ability to productize it. But as well as that, it's our ability to deliver live experiences at scale with a consistent, great quality. We've had over 4,000,000 people go through them, so they're pretty much proven to work.

51:16 And then on top of that, we've got the digital strategy that integrates live with digital. This is so important because broadly in the areas we talked about, people don't change their behavior. They don't change how they lead or how they innovate and so forth off the back of purely digital experiences. They tend to need a live human experience, and that is important. But, of course, it's they're necessary not sufficient. You also need a digital follow-up in the moment to remind and guide and prompt. So you need to have the two integrated together. And we're one of the only companies that has this live scale delivery, one to many, one to one, and also the digital delivery. And with that data, that creates a unique market winning proposition that allows people to transform lives all over the world and transform the performance of their companies. So we're really thrilled by the direction we're on. We've proven not only that we can deliver the growth in the business, but also that we can execute on our digital strategy, strategy, not least with performer.

52:10 And we're very excited about the future. Thank you for joining. That's great. Octavius, Dominic, thank you once again for your time this morning. Ladies and gentlemen, please, could I ask you not to close this session as we're now automatically redirect you? For the opportunity to provide your feedback in order the company can better understand your views and expectations. This will only take a few moments to complete, but I'm sure it'll be greatly valued by the company. On behalf of the management team of MIND GYM PLC, we'd like to thank you for attending today's presentation. I wish you all a very pleasant afternoon.