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Edited Transcript of QIP.AX earnings conference call or presentation 29-Aug-19 12:01am GMT

Full Year 2019 QANTM Intellectual Property Ltd Earnings Call

MELBOURNE Sep 18, 2019 (Thomson StreetEvents) -- Edited Transcript of QANTM Intellectual Property Ltd earnings conference call or presentation Thursday, August 29, 2019 at 12:01:00am GMT

TEXT version of Transcript

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Corporate Participants

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* Leon Allen

QANTM Intellectual Property Limited - MD, CEO & Executive Director

* Martin Cleaver

QANTM Intellectual Property Limited - CFO & Company Secretary

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Conference Call Participants

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* Sam Haddad

Bell Potter Securities Limited, Research Division - Industrials Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, thank you for standing by, and welcome to the QANTM Intellectual Property 2019 Full Year Results Conference Call. (Operator Instructions) Please be advised that today's conference is being recorded.

I'd now like to hand the conference over to your speaker today, QANTM Managing Director and CEO, Mr. Leon Allen. Thank you. Please go ahead.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [2]

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Good morning, and thank you for joining the QANTM Intellectual Property Limited Full Year Results Presentation. Martin Cleaver, the Chief Financial Officer of QANTM, is with me. After I speak to the highlights and business overview, Martin will provide some detail on the financial results before I address our outlook and priorities.

QANTM has been listed for almost exactly 3 years. Clearly, there's been some challenges, not least, some difficult market conditions. And as a result, we have fallen short on some measures. Today, I'd like to take you through our latest results. They strongly illustrate that we have stabilized the business and established a strong base for future revenue growth.

In turn, on QANTM, of the delivery of shareholder value through excellent IP service delivery to our clients, and we are well positioned to continue to build for the future. We've had a strong 2019, and now 3 consecutive half years of solid performance, following a period of softness in the market. This has been achieved as a consequence of modest improvement in the market, results of business development activities and through the realization of the benefits, essentially given the restructuring of the business paying months ahead.

Turning to Slide 5, it shows some of the highlights of our results. It demonstrates a solid increase across all financial metrics and in all areas of the business. The results reflect the strength of our Intellectual Property businesses, but also reflect the benefit of business development activities over the last 2 years in addition with the first full year contribution from our newly acquired business in Malaysia, Advanz Fidelis, which I usually refer to as AFIP. Increased cash flow and a strong balance sheet is now with a dividend payment at 90% of [NRII], resulting in a final dividend of $0.048, making a full year dividend, $0.083. The service charge revenues of our businesses were higher across all areas, with patent revenues up 10.1%, trademark revenues up 9% and legal/litigation up 35%.

Our operations in Asia are performing well. They provide a good base for growth in that region. Filings and patent applications in Asia increased 36.6%, excluding AFIP, or 96% if we include AFIP. Asia presently contributes only, sort of, 6% of our service charge revenue. I am confident that these results are very positive indicator for the future and for higher earnings contribution from the presence that we built there.

We've continued to invest in our critically important revenue resource, our people, through lateral hires, share-based compensation, promotion and career development initiatives.

Slide 6 provides a financial summary. I'll try to avoid foreshadowing Martin's presentation. I'll touch on a few highlights. Total revenue, $112 million, is up 10.3% on last year and includes a service charge revenue of $86.5 million, an increase of 13.1%. This resulted in EBITDA of $24.0 million after foreign exchange, an improvement of 19.4% on the previous year.

Looking now in more detail of the business. Slide 8 illustrates the sources of revenue. Revenue has increased across all areas as I have mentioned. The increase in patent revenue close to some extent from the growth in the market, but more importantly from our growth in filings and prosecution, both in Australia and Asia, which correlates with the benefits of our business development activity. Increased trademark revenue can be attributed to higher prosecution in advisory components. The increase in legal/litigation revenue is a result of a higher case load and a number of significant trials.

Overall, the growth was generally stronger in the first half of FY '19 than the second. This reflects some stabilization after recovery in the second half of FY '18 and into the first half of FY '19. The more modest increase in total service charge revenue in the second half of FY '19 was a direct consequence of a record achievement of the legal/litigation business in the first half.

Overall, the patent revenue has continued to grow on a half-on-half as well as pcp basis.

The components of the service charge revenue is shown in graphical form on Slide 9. As you can see, the legal/litigation contribution increased to 15% as a result of a higher legal/litigation revenue. As I mentioned, that was based on a strong cash flow in the second half of 2019 (sic) [2018], which flowed through the first half of 2019. There's also a significant contribution from the lateral commercial team we recruited at the beginning of the year. Both trademark and service charge revenue have increased compared to the preceding year. However, the contribution percentages have decreased slightly as a consequence of the strong legal/litigation contribution.

The floating chart on Slide 9 is a reminder of the revenue generation nature of our trademark and trademark businesses. The 11.9% increase in patent filings this year, not any modest contribution to the immediate revenue. However, it is a leading indicator for future prosecution and advisory revenues.

The revenue increases we have seen in both the patent and trademark businesses reflects a broader increase in activity across the life cycle, managing financial stress.

Referring to Slide 11, total group patent applications increased by 11.9%. This includes the confirmation by the newly acquired Malaysian business, AFIP, as shown in the purple block on the top of the FY '19 bar. Excluding AFIP, the increase is still significant at 8.2%. And as I previously indicated, an encouraging indicator for future projection -- future revenues over the life cycle.

Number of -- another couple of highlights in the back half of the group. Patent funds, Australia accounts for 61% of the applications; rest of the world, 25%; Asia, 11%; and PCT funds, 3%. The rest of the world funds turn to year record level in FY '19, increasing by 6.8%.

As you'll see from Slide 12, the total Australian market patent applications increased by 0.9% for FY '18 to FY '19. Against this QANTM achieved the increase in Australian volumes of 6.6%, largely may outperform sourced application. This reflects the strength of the presence of their businesses in overseas markets.

QANTM's market share increased to 14% for the full year from 13.8% in 2018, an increase in the second half market share to 14.1%.

As I previously mentioned, the total Asian patent filings for the group were up 96%, including the contribution from AFIP. This is shown on Slide 13. Excluding AFIP, Asian filings are up 36.6%. Within those filings, Singapore filings were up 44.9%.

We've been very pleased with the integration of the AFIP business to the group. It's been a significant collaboration between Malaysia, Singapore and Australia in a number of areas, including joint business development.

As part of aligning the structures and management of the businesses and in recognition of the significant contributions made, 3 senior AFIP personnel will be promoted to principal status from 1 July 2020.

As mentioned in a number of times, patent filings are a lead indicator of future life cycle revenues. This implies a strong performance in Asia for future revenue and earnings contribution, granted from what is now modest base.

On Slide 14, we show group trademark filings. The left-hand graph shows total group filings and the makeup of those filings. The group performance have decreased 2.4% influenced by the Australian market, just down 8.2%. Despite this, group trademark service charge was up 9.3% (sic) [9.1%] reflecting a combination of growth in the Asian market and Australian prosecution and advisory.

QANTM's Australian trademark filings were down less than the mark with a 7.2% (sic) [7.4%] decrease. In spite of this, Australian trademark service charges increased by 4.7%. This reflects DCC's excellent market standing in trademarks, especially in relation to contentions in advice work.

Combined trademark filings from New Zealand, Singapore and Malaysia increased 60% with a large contribution from AFIP. Singapore and New Zealand filings decreased slightly after large increases in FY '18.

Turning to Slide 15. Legal/litigation services, as I've mentioned before, had a record year, recording 34.6% increase in revenue driven by strong case load and number of trials, particularly in the first half of FY '19. A significant contribution was made by the new commercial law team, which commenced in July last year. This team, comprising 3 professionals, is delivering service in areas such as corporate and private advisory, M&A and tax advisory services. This was a successful diversification of a service offering of DCC Law.

The second half revenue for legal/litigation was less than the first, although it's still strong and reflects the inherent variable nature of that business.

To explain the results of this performance, I'll pass over to Martin, who can sum up the whole and explain a little more detail on the financial results and the contributing factors.

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Martin Cleaver, QANTM Intellectual Property Limited - CFO & Company Secretary [3]

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Thanks, Leon. Good morning, everyone. Page 17 shows the statutory and underlying profit and loss statement for the full year. As Leon has mentioned, this demonstrates a strong recovery from FY '18, with gross -- growth across all key financial metrics and across all businesses. The underlying EBITDA of $24 million was an increase of 19.4% on the prior year, with an improved EBITDA margin at 27.7% on service charge revenue.

Revenue growth dividend in the first half of the year has continued in the second half, particularly in the patent side of the business. Group service charge revenue of $86.5 million is up 13.1% against the prior year. AFIP contributed $1.8 million in its first year, which makes the like-for-like growth, 10.7%. Trademark business had revenue growth of 9.1% or 4.7%, excluding AFIP. This is despite softening in the Australian market and so is a strong result. The legal business had a record year with a 35% revenue growth. As Leon mentioned after an exceptional first half, their activity returns in more normal levels in the second half.

The Asian business incorporating AFIP now represents 6% of the group's service charge revenue and has contributed over $1 million in EBITDA for the financial year. Year-on-year, the revenue result benefited from the Australian dollar deteriorating against the U.S. dollar. The benefit was approximately $3 million, reflecting a significant portion of revenue that is building U.S. dollars, around 55% of total service charges.

Looking at costs, underlying operating expenses of $61.1 million were 9.8% higher than the prior period. Adjusting for AFIP's cost, this increase is 8.6%. As a people business, staff costs of $48.7 million represent over 70% of total expenses.

As noted at the half year, savings from the restructuring program at the end of the first half of 2018 are being reinvested in revenue-earning initiatives. We're now seeing the benefit of these various initiatives, which include full year impact of the lateral hires, some additional feet on our headcount as well as the impact of the contributions to employee share trust that was only established in the second half of financial year '18.

There was also an increase in corporate costs with some salary and headcount increases for the first time since IPO. In addition, AFIP costs contributed to the increase.

Other expenses of $11.7 million comprised items such as technology costs, travel and marketing, accounting and legal and bad debt. The increase in these costs of $1 million relates to an overall lift in the business activity with a major increase relating to overseas travel business development spend.

Slide 18 shows the strong cash flow characteristics of the business. The cash from operating activities was $14.6 million above the prior year of $11.7 million and at a higher cash conversion rate. You'll see that the cash from operating activities compared to the prior year includes the outlay for the first AFIP earn-out payment of $2.1 million, additional income tax payments offset by a receipt of a $1.6 million scheme breakthrough.

Capital expenditure outlays of $1.7 million are in line with the normal level of CapEx spend and include refurbishment costs, partly hardware replacement as well as the investment in several software projects, including a finance system and an SOE upgrade. The initial acquisition payment of $3.05 million for the AFIP acquisition is also captured.

Strong cash conversion supports a dividend payout at the top end of the range at 90% of NPATA.

The next slide shows that the group's balance sheet is strong, stable and provides capacity for future growth. The major movements from the prior year relate to the increase in intangible assets through the acquisition of Advanz Fidelis. Also related to this acquisition is the increase in provisions relating to a secondary net payment payable on the AFIP acquisition of $1.4 million. Net debt of $11.1 million is up from the $8.3 million in the prior year due partly to the funding of the AFIP acquisition and the first earn-out payment, in total $5.1 million.

Banking covenants are well within requirements. The debt levels are stable despite the increase in revenue, and the debt book remains of high quality. Bad debt write-offs and provisions are in line with historical levels.

Finally, Slide 20 contains the statutory to underlying profit reconciliation. This shows the one-off items that have been added back to a statute EBITDA of $19.9 million to arrive at the underlying EBITDA of $24 million. These are the AFIP earn-out payments treated as expense for carrying purposes with $3.1 million.

New business establishment costs representing the investment in 2 startups during the year, FPA Asia and [Effervescence], and business acquisition costs of $2.1 million, a large portion of which relate to the proposed Xenith merger, offset by the scheme break fee received of $1.6 million. Underlying NPAT for the year of $14.8 million represents a 24% increase over the previous year.

I'll now hand back to Leon to cover our priorities and outlook. Thanks.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [4]

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Thank you, Martin. Let me now take you through our business priorities and our outlook.

Looking at Slide 22, we have a number of key areas of focus. Clearly it's critical we retain and strengthen professional capabilities we offer to our clients. At the heart of our businesses is a strong culture of excellence with our recruiting, retaining and motivating all talented staff and providing high-quality professional development opportunities. It's not surprising, but this is a key area of focus and expenditure with a range of efforts including our CI arrangements, both a result of culture of corporation and team building we foster, but also align employee outcomes with those of shareholders.

To increased expenditure in every business development is correlated with our improved business performance. We'll continue those efforts through direct and targeted engagement as well as industry-associated involvement.

We plan to pursue further lateral recruitment, focusing on enhancement of our service offerings. As opportunities present themselves, we will also develop new ventures such as FPA in Singapore and [Effervescence], a small business we recently commenced that provides strategy and local services in the intellectual property space.

We've reraised our vendor principal salaries to reflect market rates after 3 years of rates set at IPO. As part of this process, all 24 remaining end-of principals have recommitted to the business for further minimum period of 2 years.

We'll continue to foster growth of our Asian businesses while continuing the leverage of business relationships across the businesses and geographies. In line with our ongoing strategy, we'll continue to evaluate and pursue strategically and financially appropriate acquisitions. Many of the opportunities in this regard

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far from the strong relationships that our businesses have forged both in Australia and Asia.

A central plank of our media business development is a significant investment in enhancing businesses and systems. The objective is to improve efficiency, enhance the client experience and provide an improved working environment for our employees.

Our resources, particularly at the corporate level, support new projects being limited. We'll be addressing resourcing issue to ensure proper support for the development of the business.

As a first step in this process, we've employed a Chief Transformation Officer. This person will commence towards the end of the calendar year. We will identify him -- prioritize the business processes and system changes before refining the implementation plan. Work will then proceed over the next few years.

Part of the rationale is shown on Slide 23. It shows the past areas of focus and success we have heading change in the ratio of professional employees to administrative employees. Some of the generic areas of focus for next stage are outlined. I believe that there's a significant potential to further improve inefficiency and service to a degree.

At the heart of the transformation will be a refresh of business processes to provide a foundation for increased automation and the streamline of services. These changes will be enabled by adopting current generation, cloud-based IT systems. I'm confident it will facilitate the optimization of business operations, client engagement and employee empowerment.

In terms of outlook, the key points can be found on Slide 24. We had a strong financial outcome for FY '19. We see a return to more moderate levels of revenue growth in both patent and trademarks for the coming year. For legal/litigation, we expect a lower contribution in FY '20 given the record contribution last year. The remuneration expenses and the investment in process improvement, as I've mentioned, will result in higher operating expenses. However, they represent essential investments in the business necessary to remain competitive and continue to grow.

In summary, we will continue to build our strong recovery. We'll do this through our business development initiatives, we'll maintain our focus on acquisition opportunities and we'll also look to include our progressive benefits from our processing systems improvement program.

Thank you very much for your attention. I'll now hand back to the moderator for questions.

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Questions and Answers

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Operator [1]

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(Operator Instructions) Your first question is from Sam Haddad from Bell Potter Securities.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [2]

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Congratulations on the strong result. Just on the -- your statement in terms of the moderation in growth in patents and trademarks. Obviously, it's pretty hard to sustain a strong level -- still strong level of growth in the dividend in your following margin. I just want to -- is that -- are you thinking low single-digit growth, sort of consistent with the market growth?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [3]

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I think that's accurate. Sam, as you know, it's always how long is the business stream. But we're seeing some -- more growth in line with long-term averages, and that's our line point. So yes, low single digits, I think, is historically the right answer.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [4]

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The reason why I asked is because you've had such a strong rebound in your filings, and that obviously leads examination work. And looking at leading indicators from IP Australia, they also suggest examination pipeline. But what are you seeing in terms of the examination pipeline? And is there a potential upside to that low single-digit growth given there?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [5]

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The revenue from that source, Sam -- we always look at it on our point of view. We load the pipe, we stuff the pipe. It's always just a little uncertain how it could be able to come through, and I'm acutely aware of the IP Australia figures. But our past experience tells me to be a little bit cautious in how quickly that flows through. As I typically -- and perhaps it won't happen this time, typically, there's a bit of a lag because as the volume goes up and throughput from the bank levels goes down, we are definitely up with it. So I'll go in the back of my mind, but I'm not going to factor in too heavily. It will be delivered. The big question is at what period of time? So that's why we're so -- we're being cautious in saying it. It's based on a moderate kind of increase.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [6]

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Yes. Sure. And just totally -- how is July with all this tracking? Just the -- did you mention it's FY '20?

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Martin Cleaver, QANTM Intellectual Property Limited - CFO & Company Secretary [7]

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Yes, Sam. July was with our expectations. So nothing's jumped out there in terms of any issues, and July is always a difficult month. Anyway, it's 28th August. It's too early to get a view on this stage.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [8]

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Hopefully, people are working hard as we speak, and we'll get a good August.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [9]

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And just on the automation initiative. Can you give -- continuously, it gives a lot of work in terms of that project developed in Australia, trying to automate the interface. Are you sort of taking a fresh look at that now and you've started the switch? Is that the reason?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [10]

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Insofar as that project is concerned, Sam, it's not really starting from scratch. However, IP Australia have changed the whole system, which is necessitated the -- are really right if you like, about our interface. But we're looking a lot more broadly than that. What we want to do is take the proverbial clean sheet of paper and then quickly analyze our whole processes end-to-end, and that is just but one component of them. And optimize those for best practice and then support them with the appropriate technology.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [11]

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And just give us a time line on these investment projects.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [12]

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Well, as I mentioned, I gave you a little bit of a time line in my presentation. Our phase at the moment, we are still in the planning -- to plan stage. This is a big project, Sam, and we're going to get it right. We're not going to do a piecemeal. It's going to be a holistic approach, and that means a lot of time in the planning stage. And then we -- there's some issues, again, it's complex. There's some issues around prioritization, and then the sequential implementation. So that's a rough answer, I know. But put it this way, we will be planning for the next -- in 6 months or so. Swinging into full gear, I don't really see that happening until next financial year, although one of the proprietary work has been done. And realistically, this is a 2-, 3-year project.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [13]

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Yes. So there'll be far on investments to wait through in FY '20 before we get the benefits in '20 -- sort of FY '22?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [14]

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Well, I think that's right. Full benefit won't be achieved, I think, until Q2 '22. We may, if we get lucky, and can get a little benefit along the way, that depends in both on how we prioritize and implement.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [15]

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And just the recent projects complete, like the finance and the SAP upgrade, is there any efficiency benefits coming through there in FY '20?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [16]

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Look, it's all with the noise. All those things you see listed on that slide are incremental. Not one of them is a step function. But cumulatively, it doesn't matter. And then to some extent, that's just the process we've been through today, addressing the low-hanging fruit, if you like. We're now taking a big deep breath and looking holistically at the business and how we can actually set it out for the next 5 to 10 years.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [17]

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Yes. And just on the staff remuneration that you've called out, what are you seeing in the market in terms of wage inflation pressures or the availability of talent? What's driving that?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [18]

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The potent -- well, the main revise that we've undertaken has been that the vendor or principal -- sorry, it was said in the light of the IPO and the issues around that, and we set and fixed those ones for 3 years. We're now at the end of that period, and so we need to revise those to what, to market levels. We've had a good look at what market levels are, and we think that we've properly, properly set those.

To answer the part of your question about supply and demand as it were of talent, they're fairly even match at the present time. There's available talent out there, but it's not an overwhelming supply. So the 2 are pretty evenly matched. It's not the one might nor the other at the present time. But yes, we are seeing a bit of a pickup in the industry across the board sort of potentially that might put a little bit of pressure on the supply. But we've been recruiting at the entry-level along the way. So hopefully, we can address any of those issues by organic growth rather than how many go through the market.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [19]

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It sounds like at the principal level, the inflation's been higher than CPI. It's that fixed terms being gone up by CPI rate, so the inflation has been higher than that. It sounds like over the past 3 years, and you have to step it up to -- that's where we are today.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [20]

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Yes. As I said, we're very based on market and remain really CPI. And it's not particular inflation, not particular factor. The issue is where were the salaries and that's market -- and generally we have to be competitive in the market. And that's the adjustment we've made.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [21]

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Based on that, that looks really encouraging, 36% -- 37% uplift in volumes organically. So just more -- in terms of color, what we're doing there to drive that? You talk about joint business development and make a current example, that would be great.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [22]

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Well, in general terms, I'm not going to let the genie out of the bottle. I'm not giving you the best lead for QANTM. I'm sure, some of our competitors are listening. But we've been cross-selling the businesses, as you'd expect. We have different client bases with different businesses in different geographies, and that gives us a great opportunity to leverage those relationships into the other jurisdictions and businesses. And that's finally working well for us, as our teams in those jurisdictions are working in regional business development. We've got a done team in Singapore, for example. We're very good at doing originating business and then starting to make inroads into market. And again, I can tell that because it's in the public steps.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [23]

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And even for those that seem to have outperformed your initial acquisition metric, is that right?

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Martin Cleaver, QANTM Intellectual Property Limited - CFO & Company Secretary [24]

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I think it's in line. Sam, it's probably yes. You're probably right, it's probably slightly down. I think when we purchased it, we said we expected an EBITDA of somewhere in the range of $0.5 million to about $800,000, and those slightly exceeded that. So yes, that's probably a fair statement.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [25]

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And what's your pipeline, I mean -- so I see as you want to be back in focus now that the moves between the companies is not happening, is that the focus moving forward, to really draw in Asia in FY '20?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [26]

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Well, I think it's pretty obvious. You see -- we are starting to work out but -- yes, but the growth we're seeing in Asia is pretty solid, and the margins are good up there. So it's absolutely our ambition to increase the size of that base.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [27]

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And that will be through acquisitions as well? So on this period, this 2 acquisition pipeline, is there anything on the horizon?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [28]

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Well, there are always things on the horizon, Sam. But we have a pretty disciplined approach to acquisitions. They have to work out with our financial metrics and also with our fit. Usually, we say 100x, but we're conscious it's very important in this business. Excellence is what businesses are built on. At this point in time, I don't want to diverge from that formula. And so there are a number of hurdles that we have to get over when we're looking at acquisitions. And it's not just the numbers, it goes a lot deeper than that. And it's also the sustainability of the businesses. So it makes quite a task, but the opportunities are there, and we'll have to capitalize on them.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [29]

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And what are your markets of interest? So you're in Singapore, Malaysia. Is Southeast Asia still going to be your core focus?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [30]

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Yes. We have interest in most of the Southeast Asian countries, and again depending on the metrics and the suitability of a potential acquisition.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [31]

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And Australia, is that -- are you looking for -- looking for, quite -- what's there, or is that...

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [32]

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We'll just see where that goes. I think -- our longer-term view in that regard, I think that we may see a bit more opportunity there, but it's a matter of opportunity. And then again, that's a rigorous approach to, is it really worth it.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [33]

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And so before I consider it, do you expect FY '20 to be a year of growth, or is it sort of going to be a period of, sort of, consolidation with the investment?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [34]

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Well, we forecast a little bit on the low, moderate growth. But we are going to be investing, and so that will influence the overall outcome. But we do have to make the investment for the future, and it's critically important. We want to be competitive. We want to provide really good service for our clients, and I can't do that without -- without investing some money.

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [35]

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So we may see some margin investment?

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [36]

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Sorry, it's a margin pressure, is that what you're saying?

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Sam Haddad, Bell Potter Securities Limited, Research Division - Industrials Analyst [37]

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Yes, sort of -- yes. Well, topline growth but maybe some margin pressure given the investment.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [38]

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That's -- well, that should never be the case. It may come out of the interim, unfortunately, so -- we'll have to balance those 2 as we go forward.

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Operator [39]

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(Operator Instructions) We have a question from Matt Gibson from [Salt].

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Unidentified Analyst, [40]

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Two questions from me, please. One is can you just tell me what your average realized Aussie dollar was during the year? And given your current hedging price, what do you expect it to be for the coming year?

And secondly, can you just maybe give any color on how you expect the Australian market to evolve post IPO. Could you cite the different cultures of those 2 organizations?

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Martin Cleaver, QANTM Intellectual Property Limited - CFO & Company Secretary [41]

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Do you want me to...

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [42]

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Dude, that's fine.

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Martin Cleaver, QANTM Intellectual Property Limited - CFO & Company Secretary [43]

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Yes. So the average rate there, it was high 71s. So overall, year-on-year, we saw broadly an effective drop of about $0.05 -- $0.05 benefit there. And we don't really forecast going forward. We do selective hedging in terms of -- when we see opportunities. But that's really based on our -- we obviously have a 3 -- or roughly a 3-month collection profile. So if we will -- based on our billings, we'll opportunistically hedge to prevent any downside risk on that. But obviously as you do that and sometimes you lose on the other side. But we -- we're in -- our aim is to prevent any sort of FX loss, so we're not hedging on that basis. But we don't really forecast anything in terms of future year results or try and forecast FX rates.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [44]

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But in relation to -- of the hedge fix up issue, I wasn't entirely sure of the question. But if I understood it correctly, it's just saying what's -- broadly, what's the impact on us? At the end of the day, yes, we put that behind us. There's plenty of room in this market for us. As you'll see, we've got a good strong business. We very effectively compete with the constituent elements of what was it exactly, and I'd be answering now the combination. What effects they -- that has in our business is relatively minor, if at all. They will do whatever they do, that's their problem. And they may -- they are unable to so efficiently by being bigger. And that's very nice to them, but doesn't really affect me. What we have to do is do what we do well, continue to focus on good service delivery to our clients and growing our business, which we've demonstrated over the last 2 years. We can do and do well in the market and in the face of the competition. So really, for me, it's move on and then, they can worry about their problems and I'll worry about mine.

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Operator [45]

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(Operator Instructions) We don't have any additional questions or set of questions. Please continue.

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Leon Allen, QANTM Intellectual Property Limited - MD, CEO & Executive Director [46]

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So with no further questions, thank you very much, everybody, for your attendance. And we look forward to meeting some of you as we go around on our rounds. And the next bigger thing for us will be, of course, the AGM in late November. So for those of you attending, we'll see you then. Thank you.

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Operator [47]

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Ladies and gentlemen, that does conclude our call for today. Thank you for participating. You may all disconnect.