Trufin (LSE:TRU) — Final Results

0:00 Good afternoon, and welcome to the TRUFIN PLC final results investor presentation. Throughout this recorded meeting, investors will be in listen only mode. Questions are encouraged and can be submitted any time by the Q and A tab situated on the right hand corner of your screen. Just click Q and A, scroll to the bottom, type your question and press send. The company may not be in a position to answer every question received during the meeting itself. Have the company review all questions submitted today and publish responses where appropriate to do so. Before we begin, we'd like to submit the following poll. I'd now like to hand you over to James Vandenberg, CEO. Good afternoon.

0:30 Good afternoon. Thanks for that introduction. I'm assuming everyone can hear me. It says now broadcasting. Great. Yeah. So thanks thanks everyone for joining us today. My name is James Vandenberg. I'm the CEO of Today, we're gonna do I'm gonna give you a twenty, thirty minute presentation on our results, and then gonna open up for questions.

0:55 So TRUFIN. So TRUFIN is a holding company. We've got three subsidiaries, Oxygen, Sitago, and Playstack, and we've got a 191 people across five offices that operate within within our group. Oxygen Finance on the left hand side. Oxygen Finance is the number one provider of early payment programs in The UK. It provides other data services to the client base as well, and it's got a fantastic client base. It's got incredible visibility of earnings, and we co own this business with management. So Targo supports over a thousand SMEs with credit control tools, and it also offers mission critical infrastructure to banks.

1:40 Its first two partnerships were with FTSE 100 companies, Lloyd's and Sage, and it's got an exceptional pipeline of blue chip clients. Yesterday, in fact, we announced we won Bank of Ireland, which I'll go into in more detail later. And again, we own this business with management and the other external shareholder is Lloyd's Bank themselves. Finally, we have we own PlayStack. PlayStack is a tech led games publishing business. It reached EBITDA profitability last year. It's growing its back book of revenue, and it's got a fabulous of games launched this year and next and in 2026. So that business is will be or targeting, I think, is is the legal term, targeting EBITDA and bottom line profitability this year.

2:30 And on the right hand side, you can see that we owned Virtus, which we sold successfully sold in October last year, so we no longer have a stake in that business.

2:43 So on to our results. So on the top left the top section, this bit you know about anyway, but to give you a quick rundown, we grew revenue by 34% to 20.5 million Gross margins of 72%, that's definitely not a ceiling, so that number can go higher. And loss before tax, which we're very focused on, loss before tax improved throughout the year, and we're very focused on that number going forward. We can expect that number to improve in the coming years. Cash, we've got more cash than we need to reach group profitability.

3:23 I think the second section is the bit that's new as of today. So that's really what we've been up to this year. So we've grown 271% year on year, so we've had a fantastic start to the year. Within that, Oxygen grew revenue by 35%. Citago yesterday delivered its second tier one bank contract with Bank of Ireland, which is a fantastic achievement. And Playstack has sold more than 1,000,000 units of its latest game, Balatro. So, again, to put that into context, that game was launched February 20. So in less than thirty days, it sold at 1,000,000 units. So a fantastic achievement and a fantastic start to the year for TRUFIN.

4:15 So going on to Oxygen. So Oxygen, why do we why do we love this business? So Oxygen is number one in its space. It's got 58 early payment clients. It accelerates payments to over 20,000 suppliers, so that's up from 10,000 suppliers last year. It's doubled year on year. And to put that into context, last month alone, it processed over 26,000 rebates for our clients' suppliers. So our clients are the large local authorities, large buyers. They have suppliers to their clients, and we process rebates on their behalf. So we process 26,000 rebates for suppliers up and down this country. Secondly, the quality of its pipeline. We've got over we've got 58 clients today, but we've got over a 100 clients in the pipeline. So we've got many, many, many years of growth, and and that's not a speculative pipeline. That's a very advanced pipeline.

5:11 It's the largest pipeline we've ever had. Finally, revenue visibility. So the revenue visibility of this business is second to none. They are five they they sign auction signs five year contracts with their clients, and on average, over 90% of contracts renew for another five years. So you can see the sort of visibility we have on on revenue is phenomenal. And if you look at the bottom right hand graph, which is the graph we show our investors every time we present, you can see that over 87% of expected revenue in the coming four years is from clients we've already signed. So again, put that in context. If we if we didn't sign another client as of today, 87 percent of the next four years revenue is in the bag already. So it's the sort of business anyone would want to own.

6:05 And we're not the only ones to love this business. We got a bid for it in December 2022, £26,000,000. And at the time, the revenue of the business was 5,200,000. It was due an EBITDA of 1.1, so that's 2022 numbers. And since then, every single metric, financial and nonfinancial, has improved. The suppliers have doubled, as I said, to 20,000. We acquired an integrated Bidstats, which is the number one tender portal for SMEs in The UK. And revenue and EBITDA and cash generation have also grown and improved significantly since that bid. So every single metric has improved since the £26,000,000 bid. Shareholders and the board rejected the bid, and they were absolutely right to do so, and we don't believe that will be the last bid for this business.

6:58 So Targo. So, Sotago, what surprised us last year? Last year, subscriber growth was over a 100%, and that's paid subscribers. So that and that is set to continue this year and next. So that was a fantastic achievement. Also, the size of the pipeline so we we we've already secured Lloyd's. We've already secured Sage, again, two FTSE 100 companies, which is an extraordinary achievement for such a small business. But the pipeline exploded last year in a good way. My son tells me exploded now is a good thing rather than a bad thing, so it it exploded in a good way. And the size of the firms in the pipeline are they're the largest banks in the world, Tier one banks Tier one, Tier two, Tier three banks, challenger banks across the board, across the globe.

7:48 So the size of firms in the pipeline is fantastic and the number of firms in the pipeline has also never been higher. So it's a really, really encouraging position for this business to be. I mean, it's obviously worth saying that enterprise sales takes time. Sales cycles are long. Client onboarding takes time. But as my mother says, good things come to those that wait. So we are so Targo has got real momentum at the moment. As I say, one Bank of Ireland yesterday, its first Tier one bank outside The UK, and it's still targeting 50,000 clients, which will put it in an extremely strong position, both as a position in this marketplace and phenomenal financial position and outcome for shareholders when we get there.

8:41 So Playstack. Playstack. I guess the question is why are we excited about Playstack? And the first thing to say is last year, Playstack recorded £8,000,000 of revenue, and on that revenue, it turned EBITDA profitable. So we've got six games launching this year. I think I suspect many of you have heard about a game called Balacha that was launched in in February. Mentioned earlier. So imagine what the EBITDA is gonna do, you know, when you when you've got six games launching, one of which has been our fastest selling game. So in in that respect, it's in a phenomenal position. We we also sold Interact. So today, we announced the sale of Interact, an ad tech business we owned. We sold it for $2,000,000 and that was valued on our balance sheet at zero. So another good really good outcome for shareholders.

9:31 And finally, Balatro. Balatro is a card game. We as we as I said earlier, we it's been our most profitable game in history. It's sold much more than a many I can't tell you that. Many more than a million units so far this year, and it's got and that was in the first thirty six days.

9:53 So in the first thirty six days, it sold sold significantly more than a million units. Imagine what it's going to do over the next five years. Yeah. So it's very exciting times for this for this business, and we've got a further five games launching this year. But I think it's worth saying, importantly, before we launched Balactro, we were very confident on on PlayStack. So why is that? This graph is a little busy, but hopefully, you can hopefully, by the end of this slide, you'll you'll see why we're why we're so keen on PlayStack.

10:30 So on the top left hand side so on the on on the graphs on the left are the games that PlayStack have launched, the first eight games. We've launched many more games than this, but we don't have room for all of them. The first game, the top left hand game is the first game we launched, and the purple dot is the total amount amount of external investment that we put into this, into this game. So if you add up the developer advances, the marketing costs, the localization, the translation, etcetera, etcetera, all the external costs that PlayStat makes into a game, the purple dot shows the that investment. The green line is the total revenue of the game. So once the green line is above the purple dot, we're making money. We've returned our investment, and we're making money. And so you can see the different profile games. Every game is a slightly different profile.

11:26 And if you take all these games collectively, the games we've launched this excludes the latter, which obviously has been our most profitable game. But if you take all the games we've launched inception states, so there's no cherry picking here, our hit ratio, so that's the number of games that make their investment back. So the hit ratio is over 90%. The return on invested capital, so the purple dot, the return we get in excess of that is 380%, and the IRR is over 300%. So these are obviously phenomenal numbers. And, you know, to put that in a score is I've been investing in businesses for twenty three years in across private equity hedge fund VC, and I've never seen such such stats. To have a hit ratio over 90% and a return on invested capital of over 300% is extraordinary.

12:20 And if you exclude Mortal Shell, which is our largest game, the return on invested capital is still over 90. The IRR is still over 200%, and this is pre, the launch of Alatro. So these these are these stats here are what gave us confidence as a company, and I think should give every shareholder confidence in what in what PlayStack is doing. It's very much a data led driven business. On the right hand side, you'll see the number of games we launched. So this is the revenue split by games. So in 2021, we had four games. The big big big green section of the pie is obviously Mortal Shell. And at the time, 5% of our revenue was from the back book, and that's games launched prior to the beginning of the year.

13:06 So we were very concentrated then. We're obviously a lot more diversified now. In 2023, we had 15 we generated revenue from 15 games and more than 35% of our revenue was from the back book. So again, similar to oxygen, if we didn't launch if in 2023 we hadn't launched another game, 35% of the revenue we achieved was from games launched in the prior year. So all these 15 games that we that we generated revenue from last year clearly going to contribute to revenue in 2024.

13:38 So the back book in 2024 is gonna be higher than 35%. We've got a further six we got we got six games launching this year, the first of which was Velatro. And so the all these stats are gonna look better in next year. They're fantastic already, but they're gonna look better next year. So I think to summarize, PlayStack has got a a repeatable, highly scalable process. It sources, publishes, and distributes gains, and and the results are, you know, are exceptional returns on invested capital. So that is why we're so excited and confident of PlayStack. So to summarize TRUFIN, oxygen was bid for already. Since then, every single financial and nonfinancial metric has improved considerably.

14:27 Sotago, yesterday, signed its second tier one bank. It's creating serious shareholder value, And the team, Sinead and her team are doing a phenomenal job. And PlayStack EBITDA and PBT profitability, our target is on track Again, a lawyer has dropped to that. So we are on track for EBITDA and EBITDA profitability in 2024, and there's obviously an awful lot more to come. So hopefully, that gives everyone a good overview of TRUFIN, why we're excited. We grew over 271% at the start of this year. We couldn't have had a better start to the year. And we are all very excited about what we can create for you, our shareholders in the years to come. So with that, hopefully, I can We can go to questions, James. We can go to questions, yeah. Fantastic, gentlemen. Thank you very much indeed for the presentation.

15:25 Ladies and gentlemen, do please continue to submit your questions just using the Q and A tab situated on the right hand corner of the screen. So James takes a few moments to review those questions submitted today. I'd like to remind the recording of the presentation along with a copy of the slides and the published Q and A can be accessed via your investor dashboard. James, as you can see, if you just click on that Q and A tab, we've had a number of questions received throughout today's presentation. You to all the investors for submitting those. May I ask you just to start at the top and just, where appropriate to do so, read out the question and give your response, and I'll catch up with you at the end. Yes, certainly. So question from Alex C. Given the revenue growth experienced in early twenty twenty four, what's been the key driver in delivering this, and can this be sustained while balancing growth and profitability? So we've seen growth across the group both from Oxygen, Sotago, and PlayStack.

16:15 Clearly, as mentioned, the launch of Bellatro has been and we write in our RNS has been was a was a fantastic boost to numbers. March is also going extremely well, I'm very pleased to say. Can we direct answer to your question, can this be sustained? You know, if we thought we could maintain 270% growth, you know, we'd be absolutely thrilled. That's quite ambitious. But can we sustain, you know, very pleasing growth this year? Absolutely. And and in future years? Absolutely. And profitability? Absolutely. Jeremy, given the good news this so far this year, can we expect to see upgrades imminently? Well, Jeremy, as you know, I can't possibly comment on that, but I think it's I think it'd be fair to say that the analyst who by the way, Nick Anderson, who's an exceptional analyst and is sadly leaving Liberum this year, Nick Anderson won't be won't be very stressed with his numbers at the moment. I think he'd be sleeping soundly with with where his numbers are. But I yeah. At the moment, we won't we won't be upgrading our numbers.

17:25 The strategic move towards recurring revenue. How do you see this increasing and adding to future performance? From Simon. Yes, Simon, so one of the reasons we sold Virtus is because Virtus was a lending business, and there was no recurring fee income. And and we very much transitioned away, intentionally trans transiting towards recurring revenue. So we see this increasing over time. We have a lending book within That's a fantastic marketing tool for Citago when it shows tier one, tier two and other banks how the process for lending, the rigor with which it does it, etcetera. So it's likely we'll always maintain a small lending book, but we should increasingly move our recurring income and fee income towards a 100%.

18:17 So Yeah. We we see that increasing every time. So are there any specific milestones that we actually look for this year? And what is the long term ambition across the group? Will you look to sell and redeploy capital in new opportunities? So long term ambitions for the group is to make money for our shareholders. You know, we that that is our ambition. We we as you can see from our website, we buy businesses, we improve them, we get them to group to profitability, and then we're going to look to sell them. So that is the that's the stated plan. And in terms of redeployment, we haven't come up out with us, you know, what our strategic decision is on that at the moment.

19:06 But, historically, we've given capital back to shareholders. So you'll read into that what you will, Simon. I think that one's not for me. From George. George, you might be on the wrong chat room. Yeah. So that's the end of the questions. I think you've covered up all those questions from investors. So thank you very much indeed for that. Of course, any further questions that do come through, you will have the ability to review those, and we'll publish responses in the Investor Me company platform. James, just before redirecting investors to provide you with their feedback, which I know is particularly important to you and the company, if I could just ask you just for a few closing comments, please. Yes.

19:51 Well, thank you all for joining in your time and your interest in TRUFIN. We are we are we're we're a bit different, bit we think a bit special, certainly different. And, yeah, it's it's I think when businesses have momentum one way or the other, it's quite hard to shift that momentum. And so a business that has downward momentum, it's very hard to turn and and to to turn that. And similarly, you know, we have got fantastic forward momentum, and we intend to maintain that momentum. Fantastic, James. Thank you indeed for updating investors today. Could I please ask investors not to close the session as you now be automatically redirected to provide your feedback in order that management can understand your views and expectations.

20:41 This will only take a few moments to complete and is greatly valued by the company. On behalf of James and TRUFIN PLC, we'd like to thank you for attending today's session. That concludes today's presentation, and good afternoon to you Thank you.