Northcoders Group (LSE:CODE) — Full Year Results

0:01 Good afternoon, ladies and gentlemen. Welcome to the NORTHCODERS GROUP PLC Full Year Results Investor Presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged. They can be submitted at any time using the Q and A tab situated on the right hand corner of your screen. Just simply type in your questions at any time and press send. The company may not be in a position to answer every question received during the meeting itself. However, the company will review your questions submitted today and publish responses where it's appropriate to do so, we'll make those available via the Investor Meet company platform. Before we begin, we'd like to submit the following poll, and I'm sure the company will be most grateful

0:32 for your participation, and it gives me great pleasure to hand over to CEO, Chris Hill. Good afternoon to you, Chris. Hi there. Thanks very much. Thank you, everyone, for joining us. I'll get on with the presentation. We so, yeah, hi. My name is Chris. I'm the founder and the chief executive officer, here at NORTHCODERS. Hi, everyone. My name is Charlotte. I am the chief financial officer at NORTHCODERS. And then, people who are not here with us today, we have Amel Bhatra, who's my cofounder and chief partnerships officer, who mostly works with our corporate clients to engage them with the business. We have two nonexecutive directors, Nick Parker from a finance background, Angela Williams from an investor relations, chief people officer, background as well.

1:23 Yes. Just to go through some of the highlights from our, reporting today. So, we are pleased to announce that group revenue is up 86% on 2021, so from 3,000,000 to 5.6. And we are reporting a gross profit margin of 70%, which after all of the kind of tech wage inflation that we've seen in the last year, we're really happy that we've managed to create efficiencies to enable that to stay high at 70%. We've had a significant increase in our adjusted EBITDA, up 152% from 400,000 to 900,000 and adjusted EPS increased to 8.5p. And we're happy to report that net assets have also increased, and we closed the year with a cash balance of 2,800,000 And this this gives us puts us in a really comfortable position to move forward throughout 2023 and make the investments that we want to make whilst keeping a comfortable level of cash, as we approach uncertain times in the economy.

2:32 So, in terms of the way that the year started, sorry, that the year finished last year, we had a significant growth in demand from our trade equal with almost 8,500 applications, which is compared to just over 3,500 the year before. So that was a fantastic achievement. This really goes to show the the significant demand from the consumer trainee pool market for our product. We have signed some major corporate partners, Rolls Royce, Every, and Disney being a new one. And our headcount rose to a hundred and one sixty three, which creates more capacity for solutions contracts with businesses as well as individuals learning how using our services.

3:19 So I'll just give a quick overview of the business because I'm just being aware that I want to make it so it's a good summary for people who are new to the story, but I'm aware that quite a lot of people on the call will will will not be able to have heard this before. So, we founded NORTHCODERS in 2015. I was working at the time. I was working to Sky, and we were recruiting people from universities who just did not have the skills on the ground

3:46 who just did not have the skills on the ground too. And I think there's some background noise. I'm not sure if someone's come off mute or something. Sorry. So we ran we ran some training courses and ultimately, ended up going to Manchester in, 2015 to start our first CODE boot camp where we hired 10 people to sorry. We trained 10 people, and out of those ten, nine of them were hired as software developers, and we grew the company from there. So, obviously, in terms of student numbers, some of this being a single cohort, so which took three months to up to, you know, over well over 600 student numbers in 2022. The way the company operates, we are split into two main divisions, which is training boot camps and business solutions. So in training boot camps, we have various technical disciplines, special specialty areas which we cover, which is software development, which we've done for multiple years.

4:46 And more recently, we've added data engineering and cloud engineering, which work well in tandem with software development to our offering. In terms of business solutions, we have a consultancy product which allows us to help big corporate businesses to bring in junior software developers from all walks of life without there being a major time spent on their on their corporate team. And corporate academies is our university intake. So when we we we work with companies like KPMG who did their academy last year and then just renewed again for this year, where they hire graduates directly from university, and we teach them how to code. In terms of training boot camps, we have we will the training boot camps are all thirteen weeks.

5:31 We have a very large recruitment pool for our traineeships, whereby we only hire around 7% of the people from that, to come onto our courses. And and we have got a nice 3% placement rates, of people getting a successful outcome, and that's due to the quality of our curriculum as well as the fact that we are very, we we make sure we do fund your due diligence upfront as to who we're offering those cases to. There's multiple different, funding mechanisms for students on our course. We've got various government funding frameworks. We also have income sharing agreements, and we have apprenticeships, finance, as well as people paying up front, consumers paying up front for the course.

6:16 So the boot camp works in four. This is where people apply. If they, get to our exam, it takes around twenty hours of personal study followed by a test. We then onboard them to our course. They go through a few months worth of training, and we then have a few people who work with them to get a career in the sector they're choosing.

6:37 Business solutions, is various ways of working with clients, and we tend generally tend to work with the companies on the on the larger side within the business solutions. We have a team as a service model where we will hire and provide a full team for a business. And and the way that we do that is that we have an internal program whereby we identify the very top performing coding boot camp applicants. So not only we are we taking the best people that wants to join our framework, but also while they're working through the three month course with us, we're identifying the strongest people from that from there and passing them onto the corporates since they have a contract with us. We're over 400 companies. Again, you know, some of there's some big names there. We've got a suite of products from launch, which is our free to hire. If you wanna hire a CODEBBIRDCODERS graduate, you come to us and we'll allow you to put a job on our job board if you pass our criteria.

7:34 Enhance being a product where, you continue to further train people and cross skilling, and accelerate and incubate to that consultancy model, which is NORTHCOD as high as the employees, and the the business pays us a pays us a monthly rate for that service. I think I mentioned academies already before, but they are a graduate recruitment program for corporate business, and there's some names there who we've worked with recently. And these are quite seasonal, so they generally happen around September, but they've always been a a last part of our of our corporate business. It's in the competitive side of that as well between the two main business areas, whereas in, like, training boot camps, obviously, you know, we do compete with, a brick and mortar traditional university.

8:20 But the thing with NORTHCODERS is that we are often chosen as a partner because we even sometimes train people who come off university courses. They treat teach great underpinning knowledge, but technology moves really, really quickly. And then people need to keep up with the skills, and we turn around quickly and changes much, much faster than any traditional university. In terms of other people who do what we do exactly, we have, there's three sort of main providers here in in, The UK, which are, ourselves, in CODE plan, and generally, it's makers of our own focus on the London market. CODE, kind of pretty much Glasgow and Edinburgh only. So sort of anything in between generally, belongs to North Curtis. So the business solutions, the biggest, largest company in our sector is FDM who run the PLC two fifty around the $8,900,000,000 market cap. Although it gives us a great confidence that they actually float in the name, at a smaller size than than we are today.

9:22 The way that they generally work is, we have very strategic advantages that we're training people all the time. And the way that the likes of FDM, QA, and Sparta, Global work is that they'll hire, like, big pools of people, which they will then train up, and they have, a bench of people who are kinda sat there and often, you know, just going to talk that, you know, they're paid a lower wage when they're not actually assigned to a client contract. And they, so in terms of, you know, brand wise, we do find that, you know, we do find companies who are preferring to partner with NORTHCODERS over them. You know, regardless of competition, whether that's the sort of the training boot camp model or the corporate model, we are solving a vast problem here. There's literally no so it's government funding going into the skilled boot camp area, which provides loads of opportunity for us to to train plenty of people to feed into our corporate services.

10:16 Yeah. So almost every sector that we're seeing, it's possible to work with. It's we literally, a couple of years ago, remember him, someone that we've hired a software developer into an egg farm. It's like this is, you know, this is Matt who I thought that we'd be working in, things like that. But everyone's looking for a digital transformation, there's just statistics after statistics, that you're reading all the time about the demand for skilled technologists and the the fact that, you know, the fact that companies can't get hold of these people is really letting is really making it more difficult for them to to, win more business and grow themselves. Cool. I'll hand over to Charlotte to go through the finances. Finances. Thank you. And so we just have two graphs on this slide here outlining the growth over the last, four years.

11:03 We obviously expect that growth to continue, at a higher rate, but it was nice to show that over a four year period. And then if we look through the financial statements in a bit more detail, that 5.598 revenue per last year, the sales mix on that, so that is made up of 4,100,000 training boot camps, just under 700,000 in apprenticeships, and just over 700,000 on the corporate solutions side. So corporate solutions wise, it was quite a small area of our business last year, and then this is the main investment area for us as we move through 2023. As we spoke about before, gross profit is strong at 70% despite having to further invest into our tech team salaries. We also gave a one off cost of living bonus to all staff members in 2022, and that was a thousand pounds per staff member. That is included in those figures, and hasn't been taken out as an exceptional item or anything like that. And so comfortable, with the forecast on that going forward and comfortable that we should see some good year on year efficiencies and, marginal growth.

12:31 As you can see on here, we've got a kind of we've moved to a to a nice, profit before tax coming from a loss last year. We had a lot of finance costs as a result of the IPO last year. And obviously, as we move forward, those costs won't be present. We do have a share based payment expense within the p and l, of around 200,000, and that's something that carries through to bottom line. Cash flow wise, some things to point out on here. So we have had an increase in trade and other receivables. This is mostly down to payment terms and drawdown date of the large government contracts.

13:18 There's not really any bad debt within our debtor book, and we were not at risk because of the type of customers that we have. A slight increase in trading of the payables, it's down that's down to growth. And we have tax refunded because we submit r and d claims, tax credits for the investment that we do into intangibles and the research and development that we do on that side of things. And talking of intangibles, we invested 400 around 460,000 into intangible assets in 2022, which is obviously cash complete cash consumption. And that is to invest in the platforms that we used to teach. Also, that is to invest in new technical disciplines as well.

14:12 We had some we did some refinancing of bank loans during the year, and we refinanced our CBILS loan to a loan with a company called Creative England, which is fixed fixed at a lower rate than we will actually see the CBOs loan move to, in the coming weeks. So that was, a good piece of refinancing there, and it takes away the, future risk. So as we said before, we finished the year on a comfortable cash balance. This enables us to do the investing that we want to do in 2023, but puts us in a comfortable position. Within the balance sheet, we have our so our noncurrent assets is mainly intangibles.

14:59 We have some we have some fixed assets on there, tangible assets in the form of laptops, some leasehold improvements, but the majority of it is software and platforms. Nothing too much to report. Happy to take questions on the balance sheet. It is the standard, two leases in within there as well, and then the cash and cash balances. So some some kind of facts on the year. So the teaching team has grown to around 60 to 47. That puts us in a really good position to, increase capacity, and we we are investing into a platform that creates efficiencies within that teaching team. So we're not actually expecting that to get any higher.

15:52 And we received 8,470 applications in the year. That is higher than we have ever experienced before and over double what we did in what we received in 2021. The attractiveness of these tech careers and of our course isn't going anywhere. Applications are slowing down. And 39% of the students taught in the year were from a non university educated background. And so we we enjoy the fact that people can use our course as an alternative to university and that we are taking away accessibility barriers as well. And the average starting salary that graduates went

16:35 on to earn has increased year on year. This is now at £27,000, but we do see people going into jobs on much higher higher salaries. That's the average. Placement rates are still strong at ninety three percent. This is people that are looking to go in to tech jobs that actually, find the way and and find a job, within six months of graduating the course. And we will continue to offer different funding options, as Chris mentioned before, the income sharing agreements. We want to make this course accessible to everyone. There should be no reason why someone cannot be a software developer or a data engineer, etcetera. And finance should not be a barrier to entry on our course.

17:27 Of course, I'll look a bit of the, sort of outlook and the growth plan. So, we have, completed the investment on the development of the first three technical areas, as you can see below, software development, data engineering, cloud engineering. When the time is right, we'll make a decision to invest in cybersecurity, which is a a a could be a significant growth area for us. But we also, at the same time, just want to make sure that everyone understands that cybersecurity is a very different profession to those of which we are used to dealing with. So it's also a bigger job for us to invest and develop that curriculum than it is to continue to build out the following technical disciplines such as projects for Salesforce and business analysis. So we are currently looking for a a corporate client to to work with on the on the cybersecurity training program as we have to kick that business off, but at the same time, concentrating on securing the revenue we need for this year's numbers, of which we've already secured over 6% off.

18:30 And that's what we are currently is our priority. So, yeah, we're in line with our expectations so far. And as Jana just mentioned, the revenue visibility for of 6,100,000. Obviously, the other is, like, larger headwinds than we've had before in the past. We're probably looking at needing to talk to two or three more times the amount of, corporate clients to secure new business, and we perhaps did do this time last year because of the kind of redundancies and the reduction in, the spending of those businesses. But, yeah, we're yet to be feel like we need to be alarmed and that we're going to have a problem. Everything's going really well, and we're building some rewarding relationships. Rolls Royce have recontracted with us, this year.

19:16 We've also been, winning some good sector, sort of business as a as a third party provider to other consultancies, as well. And we have the skills boot camps framework who, you know, we're on a a six year, purchase system now whereby they have bought £4,000,000 worth of skills we can't see North Dakota this year, which we generally always see, get an extension of about 50%. And then the year after, you're generally eligible to claim your reasonable amount plus your extension and then obviously so that should be, good to make sure that we're budgeting the right amounts of the trainee pool being funded by, skills boot camps. Then we also made an acquisition in February 2023, which was to unlock more contacts within our corporate division because within our corporate business, we also have the need for more senior experienced software developers, and we prefer to continue with the successful recipe of creating these people ourselves rather than hiring them from from others and going into the, you know, the sort of recruitment race for for those positions.

20:23 So I'll tell you a little bit more about Secleturners. Secleturners have a very sim have a very similar mission to NORTHCODERS. James and Becky are still very operational within the company, but they've joined us as they joined the the senior management team as we have done a lot of the transaction based on shares. So they're gonna see the the added benefit of being part of NORTHCODERS as we obviously work hard to deliver results and increase that market cap and that share price. But, yeah, ultimately, the the best part of tech return is is that they take commit people who end up just, organically, mostly being women, which is very appealing to, to our corporate clients, who have left the technology sector. The prime example would be to possibly have children and raise raise a young family. And then they feel like their skills are out of date that they can't get back in, and we work with corporates to, you know, we instill that confidence in and go back to the workplace. And we've done some fairly simple light switch programs that make them

21:23 if they did, you know, x software development framework x five years ago, yes, technology moves on. It moves on fast, but they do still understand the basics of being a technologist. So we're just currently integrating that business into our operations. And, you know, by the end of June, July, we will be in the position where we have that, and we are looking to really strengthen, the corporate pipeline we have with the offering from tech reserves. Paul, that's all. That's great. Thank you to both of you, Chris and Charlotte, for updating investors this evening. Ladies and gentlemen, please do continue to submit your questions. But just while Chris and Charlotte take a few moments to review those questions that you submitted already, I'd just like to remind you that the recording of this presentation, along with a copy of the slides and the published Q and A, can be accessed via your Investor Meet company dashboard.

22:13 Chris, Charlotte, if I could ask you to open up the Q and A tab, you'll see you've received a number of questions throughout your presentation. Thank you to everybody for their engagement this evening. If I may, Chris, if I could just hand back to you and maybe if I could ask you to read out the questions and and maybe give a response for us to That's And I'll pick up from you at the end. Thank you, sir. Thank you. So I'll take the first one myself, which is where do you envisage the share price in five years? Any plans for future listings elsewhere? So I'll take that into to two parts. I think that we there is a there is a significant opportunity to grow this I mean, five years is a long time. We have a, you know, huge opportunity to grow this company over the next five years. And what we are doing, at the moment with things like the tech returners acquisition, we're now looking at ways that we're going to be able to service public sector and and rather than having to be a subcontractor with some of those competitors that we that we mentioned before.

23:11 And once we've planned I feel I feel I've got two or three things left to unlock this year, and then we could we genuinely could have a incredibly scalable business model that that that's, you know, really ready next year. And it will be hard to say exactly where we're go, but the opportunity is absolutely huge. The opportunity is global. We just gotta get, you know, we now we've been well funded for the past eighteen months. We've made some serious gains on on on those initiatives.

23:41 And any plans for future listings elsewhere? Yeah. I'm not sure. Who knows? We will see where we where we take the business. We've not really thought about that one to be to be honest, but as we grow and get larger and if we do go international, then we could well be considering the second listings and so on. And a question. What CapEx is required for your hub rollout? What is required for each hub people, etcetera? And so when we did the IPO back in 2021, the hub rollout was definitely a big investment piece for us. We thought that we needed a hub in all of these cities to acquire customers. And pre COVID, we was an in person business. And post COVID and post 2021, we have realized and we've we've seen that we can create these life these life changing opportunities across The UK without the need for a physical presence in every location.

24:39 And so our course is streamed in a hybrid way. It's delivered online. We've had international students that have set the course and received just a high level of teaching of people that have had access to a hub. And so if we was to roll out another hub, the CapEx is if it's a lease, it would be some leasehold improvements, but we that that's not the model for us right now. And if we so we've got a hub in Newcastle and in Birmingham, and they are more like WeWork spaces that don't require CapEx. They they do just require a few staff members to obviously staff and run that hub. Thanks, Charlotte. So, you referenced a focus on the London corporate market. Having opportunities this year and are you looking to displace existing providers?

25:30 I've got quite a simpler answer to that question is the, corporate market in general across The UK is a humongous opportunity for NORTHCODERS. We are still very much, revenue wise waiting on our training boot camps. To keep our training boot camps the best quality and being referred to as the best provider of these things in The UK, we keep those numbers fairly tight. We are doing much bigger numbers than we used do, but we're not gonna start trying to grow the business by tripling, quadrupling the amount of people that we train. We're gonna do more technical disciplines without necessarily doing more actual individual numbers to keep those people really rare so that our corporate offering gets as strong as it possibly can be. And, yeah, we are, of course, looking to displace, existing providers, and we are always, incredibly successful in doing so. Our proposition is born from, you know, real desire to, change people's minds and to recreate opportunities. And now we're doing that not only for, you know, people who are new to technology or people who want to return to it. So, we absolutely are looking to and and do

26:31 displace, some providers who may not quite have the same value proposition as ourselves. How do you find recruiting new teachers? Does it convince their education background? Are they fully employed or contracted? So everyone is employed full time, and we generally have a good look within this large pipeline we have with people who are looking to come on our course. And anyone with any sort of education background is generally, to see, you know, if they can get their head around the onboarding of the code. We'll do an early stage interview with them a few weeks into our course, and we're looking to bring them into our team. How do you see the split of revenue between consumer and corporate moving forward? Do you have any recurring revenues or plans to launch services that offer an ability to have a recurring element?

27:20 So part one of that question, how do you see the split of revenue? So in 2022, we've been about 12% corporate and the rest consumer. We see that changing. So the plans are to grow the corporate revenue, and and we're looking at about a 25% corporate and the rest consumer, in 2023. And the plans going forward after that is that we do want to increase that corporate side of our business, but we also want to increase the kind of the the value per customer. So if we can get the value out of customer in a code in a training boot camp and then also have that follow on to a corporate piece of revenue, then that would be the ideal for us.

28:05 And do you have any recurring revenues? So we have recurring revenues in the sense that we've had consumers we've had corporates do academies with us and then come back a year later and do the same academy, but nothing in the form of kind of like a SaaS or

28:24 a a kind of a subscription based model. At the minute, there's no plans for anything like that, but we are building our own internal platforms, which we believe, might be able to be used by other other boot camps so that it might be a potential that we can, offer that out on a subscription basis in the future. I think further to that, I'd also just add that a lot of the as we invest in new technical areas, which is why we're now we've developed, like, CloudOps as an example, something we can cross sell. Cross skilling is incredibly important to retention. And, therefore, if we say, look, we got someone who who who's we've hired someone who's graduated from our coding boot camp, from our data boot camp. You know, would you like to put them through our kind of cloud ops course to continue investing in that person as they don't see investing themselves by taking the leap into this industry.

29:16 So we do think that that the kind of value per head will increase with strategies like that rather than necessarily be a matter of recurring subscription. Have you locked in the key people from tech returners and where their performance metrics that they need to meet in the acquisition? So, yeah, we have the key people from tech returners are hired currently by NORTHCODERS. We there was various stages to the deal and the performance metrics of tech returners is to well, they are joining we are now integrating the two teams, and we have got a share option scheme, which, is a way of making sure that that those people perform and obviously same as, many, many management teams. They're heavily involved in the strategy, and we we we we do focus on on bonuses for that as opposed to just guaranteed pay. That's great. And Chris, Charlotte, as usual, you've taken every question that's been asked from investors. So thank you once again to everybody for their engagement this afternoon.

30:22 Chris, Charlotte, know investor feedback will be important to you. I'll shortly redirect those on the call to give you their thoughts and expectations. But Chris, I wonder before doing so, if I may, ask you for a few closing comments. And then as I say, I'll redirect investors to give you their feedback. Thank you. Yeah. I'll just kind of repeat that. Yeah. Feedback on the presentation, anything that you people didn't quite understand or anything that, you know, they that they left and, you know, went away thinking, oh, you could have answered that better and so on and so forth will be amazing to know. And we will also try and if there is any further questions, you know, through the platform, we'll do our you know, we're very approachable. We'd we'd we'd love to answer those and just, yeah, thank you very much everyone for your time. We've had a, you know, an amazing year in 2022, and we've carried, you know, carried on that trajectory into this year.

31:08 And, yeah, we're we're super excited to just, I suppose, get back to the to the day job and keep delivering, those results. And thank you for your interest in in our company and, and our shares. Have a lovely evening. That's great. Chris, thank you very much indeed for updating investors once again. Can I please ask investors on the call not to close this session as we're now automatically redirect you for the opportunity to provide your feedback so the company can really better understand your thoughts 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 NORTHCODERS GROUP PLC, we'd like to thank you for attending today's presentation. Good evening to you all.