Text S.A.

Ladies -- sorry, just going to Start with the slides. Ladies and gentlemen, thank you for joining us today to review Text performance for the second quarter of 2004-2005 financial year.

I'm pleased to share some key highlights and insights into our financial and operational achievements during this period. Firstly, I'd like to begin with the payments received.

They have grown by almost 15% year-over-year, and they reached $22.84 million. It's actually a record high quarter in terms of the payments and as we run the business that's exactly where the money comes from.

This is an increase of 1% quarter-on-quarter which is another good thing. We will go now into MRR.

That's the second metric we are reporting. MRR stands for monthly recurring revenues and we also saw an increase in terms of year-on-year increase, that's 8.8%.

And monthly recurring revenues were $7,040,000. However, we did experience a 0.4% decline quarter-on-quarter, mainly due to the drop in the customer numbers, but it was also offset by a higher average revenue per license.

I'm going to talk about it on the next slides. Now looking at LiveChat, our flagship product.

We experienced some challenges this quarter with over 1,000 customers leaving the product. There were a couple of reasons for this drop.

It was largely due to higher churn rates, particularly in Asian market. And in terms of the months that was July when the churn was the highest.

But also, there were some things that we changed unsuccessfully in terms of the onboarding process. Those changes were made in June and July.

And as a result, we had been experiencing some problems in onboarding the new customers. And hence, the addition of the customers was not that great.

Also, those changes that we have made that have safeguarded our product against abuses of our licenses. They also have influenced the numbers.

And what is important, this high number of customers churning actually did not impact MRR, that's mainly because those customers that were churning were mainly the smallest customers. Also, important thing is that those customers that we were losing were outside of our core markets.

So the situation on the US market has been quite different to the one in Asia, for example. For the US, what is important, although the churn was quite high in July, in August and September, the churn rates were below 3%.

And to comment on that, this decrease of the number of customers was a surprise to us. We were not expecting such high reaction.

And it has to be said that those numbers are partly the result of our own actions. And so we have made a couple of changes in the product and the way we're showing the pricing, in the way the clients were onboarded and the effect we can see in the numbers.

The good things are that the number of new trials [QoL hot leads] (ph) is increasing again because we have reverted those changes. Some of them were reverted already back in Q3, some were reverted in September, but -- and hence, we still cannot see the final effect of reverting those changes.

But as I said, the main impact was on the smallest customers. In terms of the bigger customers, actually those customers were upgrading, upselling the product, the monthly recurring revenues from the enterprise clients have doubled.

And also, we made very good changes to the product in terms of the features that prepared our customers for the intensive in terms of e-commerce activity Q4 of the calendar year. Then we can talk about the ARPU or we actually -- although we have not changed the definition, but the name average revenue per license is more accurate, and we will be using this one since now on.

ARPL has increased by 1.9% over the quarter, and hence, this number per customer, per license is almost $174. Year-on-year, it's an increase of 11%.

So as you can see, the high number of churning customers actually has not influenced ARPU, it's rather the opposite. The churning customers are the small ones.

One thing to comment here is also the fact that last quarter when we had our webinar, we said that we introduced a new paid feature of all AI [One+] (ph). We are no longer offering it as a separate paid product.

It's added to higher plans. It used to be $30 that the clients were paying on top of the plan.

This -- the change that we have made is actually because of providing these numbers on the pricing lease has, to our knowledge, impacted their clients’ acquisitions. So the prices seems to be higher for the product.

We have reverted that. And now to ChatBot product.

Here, you can see that if you compare the numbers, quarter-on-quarter, we have added just a couple of customers. But what is important, in September alone, we have added 71 new customers.

Couple of things are responsible for that. First of all and the most important one is actually that, in early September, we have launched a new language model for ChatBot, and it has significantly improved the user experience for the customers and also it boosted our conversion rates.

Then the same model is now, since the beginning of October, released to also the entire customer base and it should further result in reduced customer churn from the existing clients. When it comes to ARPL for ChatBot product, it grew modestly by 1.3% quarter-on-quarter.

However, the one thing that you obviously look when -- you obviously see when you look at this graph is the fact that initial ARPU has decreased and there is one particular reason for that. We have launched in mid-September.

We have launched a promo, promotional offer that for the customers that have paid within the first three days of the trial, they -- by paying they ended the trial. But then for a change, they just pay $1 for entire month, first month.

For us, it's important to actually get the details of the credit card and to verify it. And you can -- that's exactly why you can see a drop in the initial ARPU.

Here, initial ARPU, unlike the whole ARPU is that it is calculated for the entire month. So it's average across the month.

Then there is actually a second part of the fees that the ChatBot customers are paying. This is the additional interactions, additional chats that the clients are paying for.

It is -- when they go beyond the number of chats in the pricing plan they have, they have to pay per chat. So it's actually per usage.

And this number was $32 in September. And it is, once again, important to say that this is not included in ChatBot MRR or ARPL.

Also, it's not included in MRR that we presented in the KPIs. We have more and more revenues that are beyond the subscription.

So that includes from the ChatBot side there's additional chats, but also the usage for API also some payments for using some of the integrations. Then on the HelpDesk side, we continue to see growth.

The platform -- well, the product added 29 net clients during that period, which is rather slow in terms of client condition because it was the holiday months. Then the HelpDesk average revenue per license increased by 11% during the quarter.

And it shows it actually reflects quite strong product development. And this one actually has an excellent revenue retention as part of the product.

So that’s my part here.

Exactly.

Yeah. Thank you, Lucja.

So, to sum it up, payments received grew by almost 15% year-on-year. This quarter, MRR grew by 8.8% year-on-year.

This quarter, unfortunately, there is also decline -- some small decline quarter-to-quarter as grew of RPL almost, but not fully offset the loss in number of the customers. This loss of the customers was the result of a few things.

One of this really demanding environment, but also it's result of our actions as we blocked, as we discouraged some customers abusing our product. But more importantly, it's also unfortunately effect of the mistakes we made during that time.

We made some unfortunate changes to our onboarding process, which reflected in lower conversion rates in that period. One of the changes we made during that period was adding paid AI bundled.

So I would say AI bundled is one of the things we think was the reason of lower conversion, as it's complicated the onboarding process, as it's complicated process of buying a live truck and also made it much more expensive. So we reverse these changes, we are reversing that changes because that was a process for us during September.

We now going to observe the effect. We really hope that the result will be returning to much better conversion rate from the previous quarters.

Saying that, of course, the customer churn was still very high across the board, across the geographies. But the good thing, the promising thing was the fact that during the last months, especially in September and August, we saw an improvement in our key market in the US, where actually the customer churn fell below 3%, which is one of the promising things.

The next good thing during that quarter was that the good results of the upselling, a lot of the customers actually moved from team to business plans and which is really a good thing and a result of the hard work of the sales team. Actually, we almost doubled value of enterprise plan in our MRR.

It's still below 5% of the whole MRR, so it's a long way ahead of us, but that's something promising. And that's actually why we, even with this huge loss of the customers, in the customer numbers, actual MRR is almost flat, quarter on quarter, and actually payments grew during that quarter, and the growth actually in the -- of the annual pays in the term of the payments actually sped up.

The revenues of [indiscernible], the service grew by 16%, but it's still a very small number. It's not a huge part of the business now, but it's really an important part of the ecosystem we try to build at this moment.

And so that's about the results. We just like to share some few additional things.

So one of these things is context, and maybe some of you had the opportunity to see that event. If not, there is a link in that presentation.

So actually you can see our team, which tried to summarize new things we added, new features we added to our product during the last month. It was the first such event organized by us, customers, almost 1,000 customers actually signed up for this event.

They have an opportunity now to test this new feature for two months for free. We prepared some special offers for them and actually of course we hope that the effect would be a nice upselling action at the end of the year.

Nevertheless, I think that can be an interesting thing to see that even for these of you who actually try to look a little deeper in our product on what will be happening, what we are doing. On this slide, you can have some of these features gathered in the one slide.

And of course, what actually you can see in that slide is the fact that we made some -- we prepared some new changes for each of the main products. I'm especially excited about the outbound messages features in the LiveChat.

Actually for us it's something really new. Because of that feature, customers is able to send activity message to end users, also via WhatsApp.

So actually very nice, very interesting new use case for LiveChat. Something we are very excited about.

But also we can -- a lot of features who actually are not designed for the one product, but actually are common for the one product. And that's the very important part of our strategy, and I mean building a suite.

In the previous calls, we were saying a lot about building a suite. That's the reason why we changed the name of the company from Lifestyle Software to Text.

And we think that that actually the biggest growth potential for us, that's the biggest opportunity we have. But I have to admit, although we know that, that we never share any timetable for adding some for building that suite we're just saying that's an important thing for us.

So, for the first time, we're sharing some developments and plans. So you can think -- you can see a crucial things, a crucial developments we actually delivered in the last time and the things will come to the suite in the next -- in the current quarter, in the next quarter.

I hope that actually launched of the commercial offer will be possible next year and that's something we really excited about. That for us, it's a huge change.

An important part of building a suite actually is changing our technical ecosystem. We're adding a new element of the IT infrastructure to our ecosystem.

That's very important because we have much more needs when we think about suite, but also even without the suite, we really think that we should be able to improve, further improve quality of our product, of our service. And that's why -- and that's extremely important thing for us.

We start the process of receiving certificate SOC 2, which actually is something very important. I hope that in the first half of the next year, we will have a good news about this certificate.

This -- we want to be certificated by one of big four companies, and that's crucial in the -- in trying to get some big customers because now that's absolutely must have when you're talking with some enterprise customers and having that change that the new infrastructure, having SOC 2, we will be able to be much more successful in that negotiation with potential bigger, much bigger customers. So that's all from our side.

We'll be happy to answer your questions.

I think that response to that question is that we are continuing our dividend policy. We have paid out the dividend for the previous year.

And we are continuing this dividend policy currently. We have -- currently, we do not have the corporate decisions for such buybacks and this is at least currently not the direction that we'll be the following.

At the end of the day, its shareholders' decision in our case at AGM actually. This isn’t about putting core profit in the dividend.

I think we have like one vote abstaining or against, one vote, one share, and all the other votes and shares in favor. So I would say, yes.

In our case, we think that’s shareholders decision.

I think on its own, yes, definitely, yes. Saying that, of course, at the end of the day, when you look at the reports, when you look at the numbers, the margins will depend on many factors also.

So yes, we're investing in infrastructure. We -- also the partner program, affiliate program is gaining more share in the total revenue, and this program is relatively expensive for us.

There is also some effect from the currency on margin. So answer is yes, absolutely, you're totally right.

And at this point, I'm not really sure if that really will be able to improve it, that would be enough to show to better margins at the end of the day.

So it's rather interesting question now because there used to be -- before the pandemic, there used to be a seasonal effect where July and August were lower in terms of the new customers. It has changed during the pandemic.

And now I think we are back to this indeed, seasonal effects, meaning that less customers were -- should be added during the summer months. Although this quarter, in our case, there's -- two things were much more important in terms of the effect on the number of customers.

So the optimization changes that we made in the previous months in June that has resulted also in July that the customers were churning, and also those changes that we have made and have impacted the onboarding and conversion rates of the clients. So actually, those two things were much more important in our case during Q2.

Interesting question.

So, what we are doing is that not only can use the ChatBot with this all AI sources, but you have -- as a client, you have some autonomy to add different flows in the process of chatting with the bot. However, it's not exactly by developing AI agents.

So, it's slightly a different way that we are doing it.

So at least in the ChatBot, in the case of ChatBot, you, as our customer, you have actually a lot of freedom to choose how much freedom, how flow of the ChatBot should looks like.

No, definitely, that's our mistake not providing those numbers in the presentation directly. Those numbers are given in the KPI reports.

We'll just at those and the presentation will include those, so no worries about that.

Absolutely. So these numbers are public.

These number are published in the source report. So definitely, we're not trying to hide anything from here.

Let me show this. So in case of HelpDesk, actually the activity of particular customers sometimes can have a huge effect.

Not sure whether that was the case now.

Not really sure about this is case, but no, I really don't think that it's like the end of the good trend for HelpDesk really. I'm not expecting that.

So of course, no. The mix of the customers, which is coming and going is different each month.

So really, we are not expecting that really on the very long run, like, each month will translate into improvement for the ARPL, but still a tenth of the quarter, that's a very good result. 11% during that quarter, it's okay.

It's really modern okay for us. So no, I think that, there is definitely potential in that product.

So, in case of MRR, it's -- 34% are the revenues from the US. Then other important markets, we view English speaking markets, so UK, Canada and Australia, that would be 12% and below 5% and below 5% for Canada and Australia.

So the English speaking markets are definitely the most important. Non-key markets by that, what we mean mainly is now and when we refer to that is actually the fact that the Asian customers grew over the last quarters quite intensively.

And their behavior is rather different to our much more loyal and stable customer base in those, as you call them, key markets.

So, yeah, we're working on a new product actually, as we have some advanced works on two projects, which should be new product in the future. And saying that don't expect a very strong effect from this product, don't expect too much from this product from the very beginning.

We work on this project because we believe that it can have some potential. We think that, that would be a very -- that it should really be complementary to -- for our suite.

So, say, like puzzle which pieces just fits in that picture we're creating. But we don't have a strong, very huge teams assigned for this project at this moment that are actually very small teams.

And we don't plan to not market too march launch of this product. We -- from us, it's like starting with some, let's say, soft launch.

We start with checking the business idea of flows of this project. So don't be overexcited about the fact that we work in with this new product because that won't be huge impact overnight for our financial results.

Also from the cost side, it's not like we have a huge teams assigned for this product.

That number is stable between the quarters. So we have roughly 60 customers that use all four products.

So, yes, I would say a few answering exactly the question. Not a huge success.

And actually, why is that? Why is not going so well even in the quarter, which wasn't -- was really good for the sales team?

The answer is here. If you look at this slide, global billing, we plan to release global billing in that -- in current quarter, which means, as for today, we can't offer you a single billings for the four products.

That's not something we are proud of because that's really not a good thing, but that also shows why we are not able to fulfill the potential we have at this moment because we don't have a flow which help us to sell the products together. That's something we're proving that's part of the strategy, that's part of the suite strategy, but for us, just we're not helping ourselves in that matter.

I think that this is something that Marcin has indicated that we will be starting new products, and this might be one of the new ideas that we will be going with. However, such things will be initially on a very small scale.

And you cannot expect that suddenly one of our products will be a huge addition to our revenues. We are developing a couple of things inside the company.

Some are tested with some of the customers. But -- I mean, from the financial perspective, this won't change the picture.

However, indeed, that's a part of the HealthSuite strategy. So we are doing couple of things in terms of creating the whole environment ecosystem, and that also includes activities like that.

And workflow is actually interesting thing, workflow will be monetized -- can be monetized through actually API-as-a-Service platform. So you can see that this puzzle starts to fit to each other.

It is an indication that by our suite strategy, we want to phase -- we want to solve all the communication challenges or issues that the clients have, and we want to have a whole offer and that will be definitely very important for the bigger customers. So we will be changing things as part of the suite that is in terms of infrastructure, also in terms of, like, the steps that you see on this slide are all aiming at creating a better value for our customers.

That also means that we will be -- I know we already started to cover the steps to get SOC 2 certification. That will be definitely something of value for the enterprise customers.

But for smaller customers, this will simply mean that there will be an improved quality and efficiency of our products. So, like, there is one goal for -- regardless of the size of the customers, to provide a very well-functioning, top-notch product.

And as a suite, that will fit more into the larger customers.

No. So the first thing we can uphold the dividend policy.

Today, we don't plan to change that. We can -- of course, we invest in infrastructure, especially in the IT infrastructure, we made some investment.

Maybe we will be -- have to keep some -- we have to be cautious about looking at our financial position because, of course, we will be able to -- we will have to be able to cover higher bills at some point because we started to use some additional solutions from different providers that don't means that the level of the cost will be significantly biggest -- highest -- higher that we have today because that depends on the usage from our customers. But of course, we will have to be cautious and be ready to spend more.

We have some -- we need some financial results. But really I don't think that, that will affect advanced dividend and definitely not the dividend policy.

So really, I don't think that, that will be huge impact on the current quarter results or the H1 results from this point. Of course, some costs related to the IT infrastructure is already taken, is already higher at this point from some two quarters.

So probably, we will stay at this level. And then we will be -- that will depend on how we use that infrastructure, how our business will be growing.

So no, really, I'm not worried at this point.

Organic growth is by far the most important, is and always was our way of doing things, so that's absolutely priority. But we never actually, we never excluded the possibility of the something covers.

We just never did that, but we never exclude that. So at least today, it's also -- I can say that, that's excluded sometimes, sometimes we like to see what is happening in the environment.

We definitely don't plan to buy users, and we don't plan to buy customers. But if there will be some which could be a really great addition to our suite, it's possible.

It’s not excluded.

In terms of the first question, we are not actively looking into particular cases. However, with our ChatBot, it's AI based, so you can use it for any application that you need, and you can also make it like custom either additions or you can add like different flows that will best suit you.

So as of now, we are not looking into such solutions. In terms of ChatGPT and LLMs as competition, I think we have already, maybe not every quarter, but once in a while, we talk about the usage of ChatGPT and other LLMs.

I mean, they are a technology that differently the benefits of using a service like ours, like our ChatBot is the fact that you have entire control over the the sources of the data for the bot to rely on. And you are in control of the input actually you are putting into the bot.

So -- and you can rely on ChatGPT. We've seen cases like that in the past.

But definitely, there are also some restrictions that you have to be aware of if you use those only. And those are mainly the regulatory or the question of responsibility for things that can be made up.

So we do not give such predictions because -- that's simply because there are so many things that can influence those. So even the numbers that we have seen this quarter, they were a surprise to us, and that's partly because of the changes we made within the product by ourselves, and we had to correct for those.

So no, we will not provide such numbers.

Maybe about outlook, outlook for the current quarter. Of course, we cannot promise anything.

So of course, we now look at the effect of the reverse of the changes we made, and we know it's definitely now checking the data, looking at what's happening is definitely not -- we will cover that. So it's very difficult for us.

We definitely -- we don't want -- we can't and we don't want to promise anything. Definitely, environment is still very demanding.

That's the one thing. From the other hand, this seasonability, we discussed that we are -- which was working against us in the previous quarter will be -- should help us in the current quarter.

And there is some good things in the last things much better customer churn and lower customer churn in the US, for example, also higher number of the trials and what's more important on qualified lead in the -- we will register in September. So that’s some optimistic signs.

Saying that in that environment is very, very difficult to promise anything. A quarter ago, at this call, I was saying that I think that October can be month when -- from the moment from we can really start to fight for the positive net additions because then I was -- even obviously, I wasn't aware that we actually are making at the time, we're making some unfortunate changes to our onboarding process.

But even then, we were very cautious and not really optimistic about net addition for the Q2. And now, starting Q3, we are, I would say, more cautious, but I think, yes, we can work on that.

That's something which should be possible, should be achievable to have net positive addition in the number of LiveChat customers for this quarter.

So, first of all, thank you for your time. Thank you for your attention.

Thank you for the question. Thank you for all the feedback we're getting.

Definitely the result we published especially when we discuss a number with the customers. This result in loss of 1,000, more than 1,000 customers in that quarter is partly the effect of mistake we made.

So that should be said, and we can say sorry that was our fault that the result is much worse from what you should see -- from what you should expect from us in that quarter. So we're definitely not happy.

Also definitely looking at the whole picture of this quarter, let me return to the opening slide, when I -- clicking in not the right place. Definitely, when you look at the whole picture, especially in the payments, which really show how we end in that quarter, I really don't think is as bad as some of the analysts and some of the investor think.

So we are working very hard. We have very clear task for us.

Priority is building a suite, is improved quality, is to not repeat the mistakes we made. We learned a lot during that time.

So, sorry for our mistakes, sorry for disappointments in that quarter. We're working very hard on improving our products, on deliver a suite, on deliver SOC 2 certificate, which should help us a lot.

And I'll leave you with this slide, which I really think is proving that it's not as bad as some of you may think. Lucja, would you like to add something for that?

No. Just thank you for listening to us and listening to presentation, and thank you for your questions.

We are there for you. We'll update the presentation of the numbers of the clients.

And well, just, if you have any more questions, please get back to us. Thank you.

Thank you. Thank you very much.

Have a nice evening.