Ann: Investor presentation, page-14

The following is my summary (with some analysis andconclusions of my own) from both the FY22 Results Presentation and the FY22Results Webinar on 31 May, which I listened to in full:

Organisation / Strategy

1. The core focus going forward will be in EBITDA and NPAT.
2. There are no acquisitions being considered by the Board. PayGroup is very happy with the technology set that they have.
3. There will be a decrease in technology spend in FY23, as significant investments have been largely completed.
4. Paygroup invested all of the increase in Gross Margin to Sales and Marketing staff in FY22, which should underpin strong growth going forward.
5. LTV/CAC (Life-time value / Customer acquistions cost) is currently 15.8. This means that the gross margin generated by the average customer is 15.8 times the cost of acquiring that customer. This may increase further if customers can be locked in for longer or if more customers are won by GPP referrals or upselling to existing customers.
6. PayGroup offers no discounts or incentives for GPP referrals. GPP gives PayGroup a proxy sales force for free.
7. Talent Management is a strategic selling difference.

Growth

1. The 44% ARR growth in FY22 was all organic (IWS ARR was included in FY21 reports, even though revenue was only contributing for 11 months of FY22).
2. The sales pipeline is 7 x larger than this time last year.
3. The sales momentum after the first 2 months of FY23 has already exceeded 1Q FY22.

Outlook

1. Based on history over several years, FY23 revenue should be close to FY22 ARR, or $39.1M.
2. Adjusting FY22 revenue for a full year of IWS contribution adds a pro-rata amount of $0.48M, for FY22 pro-forma revenue of $27.6M. This reveals a likely FY23 revenue growth rate of (39.1-27.68)/27.68, or 41%. This is almost identical to the pro-forma revenue growth in FY22 (39%).
3. As the proportion of revenue derived from monetisation sources increases, then revenue is likely to exceed the previous FY ARR, as monetisation revenue is almost immediate.
4. Based on likely revenue growth and known gross margin, gross profit is likely to grow by approximately $8M in FY23. Based on PayGroup’s stated intention to now focus on EBITDA and NPAT, they are likely to move much of the increased Gross Profit to the EBITDA line. A 50/50 split between investment in expenses (e.g. staff) and profit would mean a $4M rise in EBITDA, more than doubling from $3M (normalised) in FY22 to $7M in FY23.
5. Strong medium term tailwinds from high employee churn, ramping up of monetisation and GPP (new EU partner SD Worx), cross-selling to existing customers, software and technology enhancements, and stronger penalties from Wage Theft driving move to expert services.