Below are my as it ran notes form the webinar and quick take on H1 results. On hearing the expansion in TAM opportunity I bought a small (1%) monitor position on the basis that the thing stopping me was my view on a very limited TAM, but that bear case is a lot less likely now. Market liked it, going from a balance buy/sell to almost 4:1 with the price up 16.7% as I write.

Webinar notes:

• AI embedded over the last 12 months, but not shared due to viewing as a competitive advantage. Has evolved over the period naturally with learnings and experience rather than to be forced on expectations.
• Compliance is complex and bespoke to companies.
• KC now opens up 5-500 worker range (300k potential customers) Vs previous 500+ workers (2k potential customers)
• Deployment advantage from an implementation for large customers, but SMB now online and via live chat to speed up enterprise also.
• Marketing spend remains constant but CV check redirected to KC. Increase in spend would be data dependent.
• AI is 80% people and 20% tech, it is mistakenly seen as the other way around. People leader is the AI leader (Odelia) - AI first but not always…
• Using Claud as their selected LLM for the last 12 months.
• AI embedded in end-to-end development process.
• Plan to use of natural language queries within the platform and anticipatory offering
• Private data handling – probably not something an LLM will be trusted with.
• Investment is already done in KC with AI as native to it’s architecture.
• Built a ~$10m pipeline in 3 months and SMB 35 sign ups.
• Only 3 months into launch so unable to predict conversion rates or growth expectations, but should have some indication by Q4.
• Will allow existing SAAS customers to choose when/if they want to roll over to KC.
• Management target of having international revenue this year – will share more as this evolves.
• Capex spend currently expected to be a little lower but subject to opportunities.
• AI offers higher servicing capacity on existing head count rather than an opportunity to reduce head count.

Quick observations on H1 Results

• NPAT of A$861k was better than I anticipated, up slightly on H2 FY25 (A$712k), I had expected high employee costs (+SBC) given a significant jump last half, but it’s basically flat.
• Most of the half on half increase in cost was depreciation and amortization +350k (+22%) but also country to the talk in the presentation marketing was up +133k (+11%).
• Revenue up A$1.1m (+7%) half on half was a surprise and carried the result.
• Margin lifted slightly half on half from 65.5% to 65.9%, moving in the right direction but still shy of 66.9% peak for FY22, so I am wondering how long before we see the improved margins from SAAS Michael talked about in the SM interview.
• CF yet to look at closely, receipts and payments are up and any change is small and messy at a glance, we are coming off low bases for FCF so hard to judge any breakout.

I had done some preparation work coming into the result but need to do more before any further purchases, hopefully the price holds around current levels. I was looking for below 15c but the update makes me comfortable around 20c for a small research position.