Northcoders Group (LSE:CODE) — Full Year Results

0:00 Good afternoon, and welcome to the NORTHCODERS GROUP PLC Full Year Results Investor Presentation. Throughout this presentation, investors will be in listen only mode. Questions are encouraged and can be submitted any time via the Q and A tab situated in the right hand corner of your screen. Simply click q and a, scroll to the bottom, type your question, and press in. The company may not be in a position to answer every question received during the meeting itself. However, company will review all questions submitted today and publish responses where it's appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to Chris Hill, CEO and Charlotte Price, CFO. Good

0:31 afternoon. Hi, everyone. Yeah. Thank you very much, and thank you everyone to joining us. So we are really, really pleased to have our first ever results presentation as a PLC company. We have beaten the market expectation that we set out at our IPO back in July, so we're just really, really proud of everything that the team has done to get to to get to this point. Talk to the team, I'm gonna introduce the the rest of the board who who who aren't here today. So I'll introduce ourselves first. Sorry. My name's Chris Hill. I'm the CEO, and Shar Pryor is the CFO who's with me with me today. We also have our chief operating officer who's back in Manchester, Amul. Amul was one of our customers on our first ever coding course, actually. And then he came on as an early stage investor alongside his brother, and he's still here today. And he mostly works on our corporate and commercial offering with businesses across across the North.

1:31 So I'll introduce our nonexecutive directors. We've got a nonexecutive director from a chief financial officer background, Nick Parker, who's actually been with us for for quite some time as an adviser and a consultant and helped us to get through the IPO process. More recently joining us there was Angela Williams who's joined us at nonexecutive chair. So Angela brings wealth of experience as a PLC executive director. She's a chief chief people officer by trade, which is really important to to our company. And she's also been at the forefront of many tech transformations over the over during her career. She's worked as an executive for British Airways, for the post office, and for land securities PLC.

2:19 So NORTHCODERS was founded in twenty fifth just towards the end of 2015, and we ran our first coding boot camp course in 2016. I'm a career change myself. In previous NORTHCODERS, I worked as a software engineer for the company, well, for Sky Sky Bet in in in Leeds. And we just couldn't get software developers just everywhere that we looked. We were just always needing more and more people, and we just couldn't get anybody to apply for jobs. We tried multiple angles to get software developers into organization. One of those that I was involved was hiring university graduates, thinking that, you know, if we went out to the to to the careers fairs to attract people from university to come and work first, gave them the best package, we'd get the best people, go to the university's most renowned for computer science, we'd get, you a know, group of graduates that'd be able to hit the ground running and really help us with our technical road map within the company.

3:10 But it just wasn't the case. We got some great people and had some great underpinning knowledge of, yes, exactly that computer science. But in terms of the everyday coding and software languages and frameworks and cutting edge technologies that we require we're required to use day to day in our jobs, we basically had to start from scratch with these people, which led me on to understanding that, you know what? You don't need a computer science degree to be a software developer. Coding boot camps were gaining traction certainly in The States and in London also. So the general idea was, you know, let's get a cohort of people to learn how to code and see how we get on. On our first cohort, we actually closed every single person. On the right hand side here, you can see some of the biggest brands that we work with to help fuel their need for skill coders and close their digital skills gap. Our mission is to close digital skills gap for businesses while creating life changing opportunities for individuals.

4:02 So people that come to NORTHCODERS, people that we train to make the most of these life changing opportunities with opportunities which are available to them come from any background from all walks of life. We have people as young as 67 and as old as 17 join our course and succeed in becoming a software developer. We have a ninety four percent success rate in terms of people that we train landing a job in industry, which we're super proud of, and that certainly beats quite a lot of much longer courses, some some degrees that you'll see the statistics on, which take three or four years versus three months. We have three revenue streams within our company. We have our core coding boot camp, which is mostly individual people who wish to become a software developer, and our learner acquisition team finds people who arrive for the course.

4:48 Our employer acquisition team finds people who wish to employ junior software developers, and we kind of match those people together to become a success story for for our company. We've had people from partners in law firms, people on zero hours contracts in supermarkets. We've had a busker who's now a software developer earning over £50,000, and we've also had the platform station announcer from Manchester Piccadilly Train Station all train with us and succeed in becoming a software developer with no technical background, and in some case, no qualifications whatsoever. It's just really, really great to be part of a business which is profitable, cash generative, but is also creating those real fantastic life changing outcomes for individuals, which we'll come on to when we look at some of our ESG credentials later in the presentation.

5:35 Is that me going? Yes. So I will just go on to kind of talk through the revenue streams in a bit more detail. So our b to c offering, our consumer boot camp is a thirteen week intensive full time program. So the cost of the program is 8,500 including VAT, and this is paid for via several different payment options. So some of our students pay up front. Some of our students take advantage of our student finance options, our loan options. Or at the minute, we actually have department for education funding so that we can offer scholarships for type of course.

6:15 We have our thirteen month apprenticeships. So this is on the job training. So we will take we will take companies that have employees that they wish to upskill or reskill, and then we will put them through the same course just on a less intensive basis. For this course, we get £18,000 worth of revenue per seat, and that is government funded. So that's from the education skills funding agency. And then we also have our corporate solutions division of the business. So if a corporate customer comes to us and the penny doesn't fit the slot, so they don't want to put someone on our boot camp or they don't want to put one of their employees through our apprenticeship, then we will tailor a bespoke option for them. So this could be in the form of a bespoke training program for them to deliver in house, or it could be that we will build their tech for them, or we could, put them onto what what's now called our developer incubator, which is a new product that we have, which basically gets their tech teams ready to then be able to deploy them back into the business.

7:24 Underpinning everything that we do is a balanced and flexible business model, which Charles just spoken about. We have multiple ways of putting together different modules to create many programs for many different businesses and many different industries. That's not very many industries that we haven't actually served as customer as clients. We have once had a thought, you know, we've not we've not done the energy industry because we've never worked with, you know, one of the big gas companies. But, actually, we have worked with many green energy suppliers, so we've also worked in that sector too. It's not also just about, you know, your blue chip

8:01 sort of super high-tech companies that are looking to have people in software development technical skills. Everybody and every company is looking to be more technically savvy and have more digital skills within within their organization, and coding underpins many aspects of that. We actually, last year, had a egg farm hire software developer from us, which is something that I probably never expected when we start the company five years ago. And underpin also underpinning our success is the way that we make sure that we only attract the best people to to apply for for our opportunities. So we have an entry challenge for the course, and that is literally is sort of two to three week process whereby people must learn the fundamentals of software programming. Can on their own, we do have some platforms that we are building out and also some sort of short free courses available for people to to get a taste of it.

8:53 But then to be considered for the boot camp, they must pass the test, and it's around seven to one. It's around one in seven people that we take from the pool who are interested through to actually actually taking a seat on the coding boot camp or on an apprenticeship. And thereby, that's how we get to a result of ninety four percent of people succeeding and almost every single person that we take on completing our course. So just a few of the awards that we've won over the years. Now I understand that, you know, there's you you see many company who may have won, you know, awards like Fighter Center. What does it really mean? For us, what it means is that, you know, we've got a super team within within our business because we've got the ability to win awards, which are usually given to, you know, really super fast growing high technology technology focused companies. But at the same time, we've got elements of our business which are regulated by by offset. You know, we're we're we our printing company is subject to offset inspections.

10:00 So to be able to comply with things like that, but as well as also be seen to be, you know, super tech savvy and really, really fast growth and really agile as a business. We're really, really proud. We're really, really proud of that. Okay. So a lot of people ask about, like, you know, who's your competition, Chris? You know, what's what's going on with the, you know, universities? Surely, you know, the universities are starting to do things like this now and, you know, large, big apprenticeship companies like, you know, like the like like the colleges or or or or the big providers as well. So we firmly compete certainly agile competitive edge by making sure that everything we teach really is the latest technologies. Our tech team are also consultants that go into businesses and go into work on live software projects, whether that be for us or for external clients. So they know exactly what are the trends, you know, what we're following.

10:53 And we make sure that we get people coming out of Northcoder company saying, you know, if you want someone that hits the ground running in your software development team, you go to Northcoders. It's very, very different to how long it takes for traditional educational establishments to to come up with new curriculum and and move on like that.

11:12 Cool. So I've just got some some recent kind of quotes and stuff from the that that I've been playing about on the Internet recently just to kind of highlight the really significant demand and the growing market that we are experiencing at the minute. So two thirds of UK businesses plan to invest in tech training for employees, and the fact that half of all UK bosses plan to hire new tech staff this year, so I just that kind of just underpins the fact that this is not sec this is not just one sector. This is not just the tech industry. This is the demand is coming from all different industries, and we are post IPO. We're in a really, really good position to be able to really take advantage of all that demand as we move onto our growth path and through our strategy.

11:59 K. Yes, g. Yeah. So we just have some some statistics on here that we are really proud of as a company. So NORTHCODERS really champions diversity and inclusivity. It's at the heart of everything that we do. We have teams set up, and we have things in place to really try and bridge the gap between the so the low percentage of women and people from diverse backgrounds in the tech industry. We hear a lot from our partners and from the businesses that that we work with that it would really benefit them to have more diverse teams. So that's something that we really champion, and we really want to try and make a change for in the industry. We have been awarded with we have awarded 294 fully funded department for education scholarships.

12:49 So this is something that we we're really we're really pleased that we've been able to do. This completely makes the course accessible to people from from all walks of life that maybe wouldn't have been able to afford it before, which also would really diversify the industry. K. We'll move on to move on to the financial review and the year end. Yeah. So I'll just talk about some financial highlights from our results. So we're we're really pleased to report that we had a 124% increase on revenue from 2020. So we met our market expectation of 3,000,000 revenue. We can also compare that to our most recent kind of non COVID year. So if we look back at 2019, which was our highest ever revenue year of 2,000,000, we've also smashed that as well.

13:46 We reported a gross profit margin of 72%, so we aim to move back towards our target of 79% that we've seen in 2019. So we are steadily moving back towards that level, and this is driven by the cost benefits of the new hybrid model. We now are able to teach a lot more people at once. We need a lot less tutors to reach the type of demand that we

14:11 want, and so we're really happy with that. Our adjusted EBITDA, so we report EBITDA, and we adjust it to take away non underlying costs. So we remove the IPO costs, and we also reduce share based payments. So this we're really happy to see that this has gone from a loss of not 300,000 to a profit of not 0.4. This just shows that our underlying profits are good. And as we move into future years where there's not going to be them non underlying and them exceptional items like the IPO costs, we're in a really good position moving forward. And we also reported net assets of 2,200,000, of which 1,600,000 was cash. So that puts us into a really good position moving forward throughout our growth plans.

15:00 K. Thanks, Charlton. We obviously are just yeah. As I said at the beginning of this presentation, we are really, happy with these results. You know, we've beat our the expectation of the profit. Obviously, I know it's quite easy for a company to have come and done an IPO, which is a huge distraction. It took loads of our time last year and then find it being a little bit of a struggle to actually meet your first set of results or or or subsequent ones. Yeah, we're just really, really happy to have done that, and it's put us in a fantastic position for this year also where we've got over 55% visibility of our revenue targets of the market expectation for our revenue this year. In terms of operationally, you know, we we we are ahead in terms of our costs and our and our underlying profit. So we are really in a fantastic position to to do the same again with with this financial year also. So I'm gonna skip within the slide deck, which will be available to download.

15:52 There is some much more detailed tables on the income statement, which you'll be able to acquire should you be interested in in in seeing more detail. I'm gonna go into a few more parts of the operational review of the company and what's happened over the past year.

16:10 So at our IPO, we set out a strategy of doing a regional rollout of hubs. Now what a NORTHCODERS hub is is is a small place where people can come think of it as opposed to our traditional business model was we used to have lecture theaters. We used to be doing the same delivery of the content in Leeds as we did in Manchester. There are people jumping on the to get from one place to the other to to help out on, like, the crunch days when it was busy. And then, obviously, during the pandemic, all that was taken away. Everything was done completely a 100% online. What we wanted to do with our hybrid delivery model was take all the best parts of our old business, like the building of community, the fact that, you know, learners can come together and help each other and and and really work together, meeting with employers and networking, just that kind of stuff that I think everyone will realize that we missed when we were literally all sat sat in our houses for for however however long it was. So that was the the plan was to get the message out there. We need to hire someone in learner acquisition, a person in in in employer acquisition, and spend some money on marketing, and then roll out into into these regions. But now in North Curtis Hub is no longer like a like the the campus in Manchester was 10,000 square foot. We had two big kind of, like, lecture theaters. Think of, like, you know, in a university.

17:30 Now a hub is more like a more like a WeWork for learners to kind of come together, come in once or twice a week, get the get the best part of that togetherness and thrive within their learning, meet each other, and do all the best bits. But still, it's not a massive overhead for us as a as a company. So we now have four hubs, Manchester Leeds, Newcastle, and Birmingham. The plan was initially at the IPO for next year to have a hub in Liverpool and and Sheffield also. We actually feel that we can accelerate that now and and do those two this year faster than we set out to do. And we also have an interesting hub, which is a partnership with GROUP PLC through a friend of NORTHCODERS, Jason Stockwood, who's best known for being CEO of mass.com and more recently, Simply Business for those that that that know that company. And he's just really keen on making sure that opportunities that are available, you know, these life changing opportunities that are available for individuals that he's making sure in his hometown and, you know, through the football club that that he loves and now owns, that everyone's got the awareness of this. So we're gonna be opening a hub in Grimsby Town Football Club, which is actually in a partnership with with Lincoln Football Club too and spreading to also a regional hub in Hull.

18:44 But as we can see from the where we taught our students from, you know, we've had someone from as far as Hong Kong. So we're not reliant on, like, a physical a physical premises to be able to deliver our business model when there was, like, the more recent lockdowns once we transform the company into being this this hybrid model, which is so much more efficient. We had no negative effects of of the lockdowns where we also have to almost stop running our business for a few weeks while we we pivoted to to to to the new model. So that's really good. We also have our corporate solutions business, which we're putting focus on. We've always done some corporate work. It's mostly been very bespoke software engineering services, but we're also spreading out our business in in more sort of horizontal growth into, like, data engineering being one of the areas that that that's become increasingly popular and also seems to be less people doing doing data engineering. We recently signed a solutions contract with with Rolls Royce, and that's worth about 250,000.

19:42 That's actually that's actually a similar model to the company FDM Group who were on the FTSE stock market with over 1,000,000,000 in their market cap. There's a higher train deployment. This is very similar whereby NORTHCOD has hired some people, trained them up in data engineering, and we've deployed them as a team with a senior engineer captain into into Rolls Royce, into in into their data science teams. And we've got multiple conversations. We signed a new contract literally just now, and we've also got conversations with some really big companies, many on the many on the FTSE one hundred market. Some of the conversations we're having at programs, which are, you know, four times that size. So that is a big area of of both of us, and we hope to see more of a split of our revenue between boot camps, consumers, apprenticeships, education, and solutions, which is which is b to b corporate.

20:32 Done. Yeah.

20:36 So we've just got a few kind of statistics here, a few highlights from the year. So we had a record numb a record amount of demand in 2021. We received a lot of applications and which has kind of created a really good pipeline as we've we've gone into 2022. We were really pleased to announce that we enrolled 99 apprentices onto our apprenticeship course in the year, which is a new that's a new line of business for us, we're just excited to go into 2022 with a really, really functioning business unit. We grew our teaching team in the period and then further growth in 2022. So we currently have 42 staff on the teaching team and 80 staff in total now.

21:23 And then we are we're proud to, say that our average starting salary that our graduates went to earn, has increased to $26,004.08 8, which is an increase from about 25,000 in the previous year. So we will continue to kind of focus on this these operations. We want to increase accessibility. We want to keep adding more kind of finance options to the group and really just kind of take advantage of this increase in demand. K. So I've just been looking through the looking through the questions, and we have four questions only so we can probably answer answer all of those. So I was gonna see who's the best person for each for each question.

22:13 In terms of high highlights as well, we've also been working with the within our apprenticeship company, North Coast TechEd, which is a separate business which we bought over a year ago. I've been working with the government on the skills boot camp initiative, which is basically the government saying, and we've been involved in this conversation for a long time. You know, this this course seems to work really, really well, NORTHCODERS. You you got a really and that'd talking to a couple of other, you know, well known good quality providers too. You know? How do we actually, you know, use government funding to be able to train people quickly and for people to ultimately be, you know, training for the jobs of tomorrow as opposed to as opposed to, you know, jobs that are gonna ultimately be be made redundant. And we literally got wind of a conversation with the we got wind of news from the Department of Education that all those trials and and and those conversations have been been a huge success. And over the next four years, they're gonna be putting £1,500,000,000 into skills boot camps. Now that's obviously not only software engineering, but we are we are also doing other things here at NORTHCODERS. But in terms of, you know, the amount of money that's going into that, it just to show a long term commitment to kind of leveling up agendas. And and everyone always, you know, seems to think, you know, oh, well, with government funding, it's like, you know, there's gonna be, smart meter phenomenon that as soon as they say, oh, smart meters aren't free anymore, then that's it. The tax turned off for for the companies that do nothing but but install those. Now we've obviously got a a diverse streams of revenues, but also things like that do do show real commitment to digital skills and and skills of tomorrow from from the

23:43 government, well, from the funding vehicles that that that support education companies. So question is the revenue profile. We seem to have a few financing questions, which is brilliant. So if we can just do you want to just pop back onto the financial slides? Yeah. Do that. And then we'll run through. We did kinda skip past them, didn't we? So let's go into it more. Which one, Charlotte? So I wanna find the slides. So I must just jump in and just say to all the attendees, if you do have questions, please just click on that q and a tab and send those through now, just as the team take a few moments to review those questions, and we'll cut straight into them. So, Charlotte, back to you. Thank you. Thank you. So what is the revenue profile? How much visibility do you have going forward? And how do you scale up what is needed.

24:29 So in the year, so if we look at the 3,000,000 revenue, that is split across our three different revenue streams. So it was 40 34% apprenticeships, 47% boot camps, and 19% corporate solutions. So we have as Chris said, we've got that 55% revenue visibility going into 2022. So that is mainly around the fact that our apprenticeships are thirteen month programs. We got a lot of visibility there, and we've also signed some corporate contracts, and then we've signed the contract with the Department for Education as well, which provides us with a lot of visibility. But super happy that we we can kind of we are now in a position as a business where we we can fall forward looking and we can see that that that have a new visibility. How do you scale up what is needed?

25:17 So, basically, we've we've got all our teams in place. We have ramped up cohorts, cohort sizes. We just we have just in January, we did our biggest ever cohort of a 104 people, and we will just keep upping them numbers. We've got all the infrastructure in place. We've got all the software in place to kind of create them efficiencies. So we're in a really good position to scale up. Cool. So, Simon Oh, sorry. You don't you don't I was just I was just, you know, I'll do I'll just go to Simon's. That's two questions. So I'm gonna say, Shout's answered the first question by Simon about the revenue split for, obviously, apprenticeships are government funded coding boot camps are consumers, and corporate revenue is is is is the solutions. So that's the and the second one is recruitment is finding due to the problem as in, you know, are we also experiencing a problem that we're that that that we're trying to solve. So we have two different within the we have a core a core tech team, which are ultimately scalable across, well, in theory, hundreds of thousands of learners. And they are the six people there is in that team that are responsible for the content, for making all the preparation and delivery of workshops because the the the all the workshops, whether you're a hub, whether you're in Hong Kong, or whether you're, you know, literally in in Manchester or Leeds are delivered online.

26:36 And then the rest so those people, we have a fantastic package for retaining staff and team members. You know, in general, we have a four and a half day working week, which we're looking to improve upon. We also have a scheme for that team, especially our more

26:52 senior people, which is our share option scheme, which is going to see that team as we as we succeed and as we grow our our share price. They will also benefit from from the share options that we put in place to them at our IPO. But the actual we have mentors as well. So that is you have basically eight for eight learners, you have one mentor. Now we are investing in our intangible assets to improve on the efficiency of the course material and the delivery of it, and we've got some machine learning on our help desk and so on as well, which is gonna help us improve the scale you know, the the ratios and ultimately the cost. But those people are people we hire them directly from the the the coding boot camp ourselves, so we always have a a stream of people coming through. People who we think are ultimately the best people.

27:37 We'll have the earliest conversation with them before anyone else gets to talk to them if you like. And they are usually the people that come on to, say, mentor with us for one, three cohorts depending on how they feel, and then they may well go on to a contract like an incubator contract like the one I mentioned with with Rolls Voice where we actually deploy them into a business,

27:56 and and they they're an employee of ours, but they are contracted to a to a corporate solution with a company. So I hope that answers that question. What have we got? Yeah. So per the cash flow statement, I don't know if you want to flick onto that one, please, Chris. There was a £1,000,000 cash outflow from operations due to an increase in receivables. Can you talk through this on whether it will reverse out in 2022? So, yes, there is an increase in receivables there year on year as we move into '21. This is due to, basically, the the growth weighted towards the the the end of 2021, which which also caused the payment terms to kind of push into 2022, and that's that's the main cause of that receivable increase.

28:42 We also the the the payment terms are a bit longer on the department for education funding just because of stuff that we need to do to to to claim the funding. So because that ramped up in the in the last part of previous year, that caused that number to increase as well. And, yes, it does reverse out in 2022. There was a bit of a timing issue which caused that high number. Cool. That's very good. Thank you. You've picked up all the questions. Of course, any further questions that do come through, the company will be able to review those, and we'll publish responses where appropriate to on the investor meet company platform. Chris, perhaps before redirecting investors to provide you with their feedback, which know is particularly important to you, I could just ask you for a few closing comments, please.

29:29 I think the closing comment is just, you know, we are super happy with everything that we've done since our IPO, and we're really happy with the value that we have and that, you know, that that we've managed to meet the expectations of our new investors that have, you know, stuck with us through through the the process. I suppose people who were shareholders before the IPO and that came in with the fundraise at that time. We're we're we're in a really, really confident, fantastic position for this year. We've come into the year, you know, with really, like, our biggest intake ever to really kick off from January with some you know, with with our sort of best monthly and quarterly revenue numbers that we've ever had. And, yeah, you know, we beat the expectation for the profit last year, and we're feeling in a really confident great spot for for for this year. I'm just excited to get to the next set of results, which will be the interim results in September, which we think by then we'll have visibility of the entire of the year's market expectation in terms of revenue, and we'll also have

30:30 a much better publishable figure on where we are with expectation in terms of profit and whether we're likely to be able to beat it like we did like we did last year. And thanks, everyone, for for listening would be what I would say. Fantastic, Chris. Charlotte, thanks indeed for updating investors today. Can I please ask investors not to close the session as we automatically redirect it to provide your feedback in order the team can better understand your views and expectations? This will only take a few moments to complete, and they will 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. That concludes today's session, and good afternoon to you all. Thank you.