Earnings Call: H2 2025

May 1, 2026

Summary

FY2025 revenue rose 16% and EBITDA increased 202%, supported by subscription growth, higher margins and operating leverage. ARR continued to grow in 2026, while management emphasized AI-enabled products and a medium-term Rule of 40 ambition.

Good afternoon, and welcome to the Skillcast Group PLC 2025 results investor presentation. Throughout this recorded presentation, investors will be in listen only mode. Questions are encouraged, and they can be submitted at any time using the Q&A tab situated on the right-hand corner of your screen. Just simply type in your questions and press send. Before we begin, I would like to submit the following poll. I would now like to hand you over to CEO, Vivek Dodd. Good afternoon to you. Good afternoon, and thanks, Alex, and thank you, everybody, for joining us today for the presentation of our full year 2025 results. I am Vivek Dodd. I am the CEO of the Skillcast Group, and I am joined by Richard Steele, our CFO. I will give a brief introduction to Skillcast, for the benefit of those who may be new to us. Skillcast helps companies build more ethical and resilient workplaces by digitizing, automating, and consolidating their staff compliance processes, such as their compliance training, policy management, staff declarations, submissions, and record keeping. We make these compliance processes simple for our clients with the use of our excellent technology platform and ready-made e-learning content that our clients can customize very easily, exceptional service, and increasingly, AI features. The demand for our products is relatively resilient because compliance is a non-discretionary spend for most companies, especially those in regulated sectors such as financial services. We have clients of all sizes. They contract with us for annual subscriptions that generate steadily growing annual recurring revenue and strong cash flows. Our business has high operating leverage. We reached the EBITDA break-even point in the prior year, 2024. In 2025, we saw a step change in profitability and cash flows, which supports our growing dividends. With that, I will hand you over to Richard for our financial highlights. Thank you, Vivek. Good afternoon, everybody. Thank you for joining. Our year-end is 31st December 2025, and we are pleased to report another good year of top-line growth and a step change in profitability, as Vivek said. Our annualized recurring revenue grew 19% to GBP 13.8 million on the year. Our total revenues grew 16% to GBP 15.3 million, and our subscription revenues grew 21% to GBP 13.3 million, now making up 87% of our total revenues. Our gross margin grew two percentage points to 75.7%, and we saw a significant increase in EBITDA, over 200% increase in EBITDA to GBP 1.5 million. The Rule of 40 stayed level on the year at 29%. Just a reminder, the Rule of 40 is defined as the sum of the ARR percentage growth on the year of 19% and the EBITDA margin in the year, which in 2025 is 10%, so making the 29%. Our EPS grew 154% to 1.45p, and we increased our dividend by 20% in line with our stated dividend policy, which is in line with the growth in subscription revenues to GBP 0.620 pence. We generated significant cash in the year of GBP 3.7 million in terms of free cash to end the year with nearly GBP 13 million of net cash in the business. Just to repeat, this is our fourth consecutive year since IPO of +20% growth in subscription revenues. ARR, the key KPI and lead indicator of our business, and we measure it very closely. I am going to give a bit more breakdown on that this year. The 19% increase in ARR was predominantly grown by an increase in client numbers, which went up 8% to just over 1,200. This excludes our CoreCompliance customers. We have about 200 clients that buy our online self-serve product, which is a much lower AOV of around GBP 1,000. We have excluded that because it distorts the key metrics of our core business. The average ARR per client also increased by 9% to over GBP 11,000. Our net retention was in line with last year at 101%, but it was for very different reasons. We put prices up by only 3% last year compared with 7% the year before. We saw our churn reduce from 11%, which was abnormally high, to more normal levels of 7% last year. We saw a real support in the net retention from our product upsells. We launched over the last couple of years two other plans apart from our standard plan, which was where most of our clients are on. We launched a Premium plan two years ago, which is where you can buy all our Enhanced Learning and all our RegTech products in one package. That is called Premium. Then a year ago, we launched an intermediary package called Enhanced Learning, which gives you all our Enhanced Learning, but not the RegTech. For example, that would be Question of the Day, our diagnostics and our very popular Fast Track product, which if you are a competent professional and you know the regulation very well, you can undertake a pre-assessment and save yourself significant time in your annual mandatory learning. What we are delighted to see is in the year that we have doubled the percentage of ARR that has come from these upsell products of Enhanced and Premium from 7% of ARR to 14% of ARR. There is also an increase in the CoreCompliance. It still says 1%, but it is just rounding to 1%. Because it is much lower AOV, it does not have a huge impact on the overall numbers. In terms of operating highlights, the reason we managed to grow our EBITDA so much was by maintaining our headcount at pretty steady levels. Our headcount grew by 4% compared with revenues of 16% to 125. We are continuing to maintain a low overhead growth because we have got most of the roles in place that we need to grow the business in the medium term. Plus, we have continued to adopt AI, both across our products and in our operations. The investment in the operations of AI has helped to maintain a lower headcount growth. We are obsessed about our customer service records. We believe it is a real USP in our industry and in our marketplace. We have continued to maintain a Feefo award of 4.9 out of 5 for service. We started recording and monitoring our CSAT score, which since May last year has maintained over 93% from more than 1,100 responses. Excuse me. Other highlights that we have done this year operationally is we have launched a new EU library that was released to improve client retention and drive new client acquisition in the EU. We have about 100 clients currently in the EU, and by having a more multi-jurisdictional offer, we believe this is going to both improve client retention and bring us new clients. We have strengthened the commercial tech stack to increase automation and improve client experience. We have launched an advisory board that really helps our marketing, lead generation, content-driven work to help drive inbound leads. We launched a new website and rebrand in March 2025. We have also pivoted, as many people have, to the large language models and AI Overviews within that to improve the return we get from that website. Really important in our industry is that we hold all our clients' data and all their learning records in a secure and safe environment. So we are really pleased that we have reaccredited with SOC Type 2 compliance and Cyber Essentials Plus in the year. Looking at our financials in a bit more detail. As I mentioned, our subscription revenues grew 21% on the year, and the professional services revenues continued to fall. In 2025, they fell by 9% compared with 18% in the previous year. The main reason for this fall in professional services is what we believe is a market trend. Professional services, while we will willingly do the work to large banks and large other industrial companies that want to spend money on bespoke courses, it is not of strategic importance to us. We believe that this is particularly susceptible to the AI risk of people wanting to build courses in cheaper ways. So it is something we are not particularly perturbed about, but that this is declining. In terms of our gross profits, we increased that by 2 percentage points to 75.7%. Behind that, we have got our SaaS margins, our subscription gross margins are typically 80%, and we believe there is more scope to grow there. Our professional services revenues, which are the main reason for the increase in the gross margin this year, are around 6% because we have taken reductions in headcount to narrow the declining professional services revenue. Our overheads grew 9% in the year, and this was a combination of a 4% new heads and average pay rises. This led to an EBITDA growth of 202% to GBP 1.5 million in the year and a 200% increase of profit before tax to GBP 1.6 million. This graph effectively shows the declining amount of overheads as a percentage of ARR that we are planning to spend. So it gives an indication that we expect overheads to continue to fall as the percentage of revenue, indicating that we believe there is future growth in our EBITDA margin from the 10% that we delivered in 2025. As I mentioned, we generated significant cash flow in the year with GBP 3.7 million. The way our business works is that most clients subscribe with us on a 12-month contract, which is invoiced up front and paid in 30 days. A lot of that cash is coming from the fact that we are generating profits now, but also growing ARR, which is growing receivables. We've also worked hard on our whole order-to-cash process, firstly by bringing in an auto-renewal program, but also on our cash management, which has helped to see debtors reduce from 54 to 45 in the year. The free cash flow was boosted by a £0.5 million tax rebate from the Maltese authorities that refers to prior years and is not repeatable, although there's a remaining £150,000 on the balance sheet that we expect to receive from that. As I said, we are continuing to pay dividends, currently yielding about 1.4%, and that grow in line with subscription revenue growth. Our balance sheet is incredibly simple and clean. We do not capitalize any product and tech expense. The assets on our balance sheet really relate to the right of use assets of our two offices in London and in Malta, our more operational office, and any general sort of fixtures, furniture, and fittings, and IT equipment that we use. The other large item is the deferred income on the balance sheet, which is the unrecognized subscription contracts that clearly is growing in line with the ARR. Our corporation tax liability has increased significantly in relation to the fact that we are now making significant profits as well. Here's a quick snapshot of our four-year history since our IPO in December 2021. As you can see, we've grown ARR consistently from £5.8 million to £13.8 million, with a compound annual growth rate of 24%. Our margins have grown. There was a slight dip in 2022 as we were migrating to the Azure cloud services. In 2023, and then by then we managed to optimize that, and margins have continued to increase ever since. Our EBITDA has, as planned, decreased and then started to increase again. We deliberately, as part of our IPO, we raised funds to accelerate our investment in technology and commercial and other overheads to support the growth of the business. We're now on the upward trend, as is our cash, as generating the £3.7 million that I mentioned earlier in 2025. Here's just a quick example of a classic case study. Exemplar Bank came to us, and they saw our website. They used our ROI calculator on our website and are really pleased with not only the quality of our courses, the fantastic customer service that they get from us, and the customization that they get, they are able to do with their courses. But also the ROI, and that they've managed to save 2,700 hours in timing because of all the tools and our dashboard reporting and the fact that we digitally deploy courses to everybody, and there's all certificates and all the mandatory records that they need are held digitally for them. I will now hand back to Vivek, who will tell you a little bit more about our strategy. Thanks, Richard. Having seen our financial performance in 2025, let's turn to our more medium-term strategy, which is to achieve the Rule of 40, as Richard explained earlier. This is the sum of our ARR growth rate, which we expect to continue at around 20%, and our EBITDA margin, which we also expect to grow up to 10%, 20% over the coming years. The way we expect to achieve this objective or these two objectives is by continuing to grow organically, by continuing to attract new logos across all sectors, in particular the financial services, where we already hedge at 61% of our revenues, and public sector, which we've started growing in this year. We also expect to continue to develop and grow our self-service product, CoreCompliance, that Richard mentioned earlier. This is a real boon for the smaller businesses. Our ACV or annual contract value for this business is around GBP 1,000. It's a very affordable solution for the smaller businesses. We will expand our EU clientele with our country-specific library that we launched last year, and we're going to market with it this year. We also expect to maintain our net retention over 100% by keeping our churn low, our downsells low, continuing to upsell our products as clients upgrade from our standard to Enhanced Learning and Premium plans. We continue to innovate our products and strengthen our differentiation in the market with the use of AI and non-AI tools. We've traditionally been in the business of automating compliance for our clients through non-AI means. However, AI opens up new exciting opportunities for us. At the same time, we are continuing to create more engaging formats of training for our clients. That is the core reason why many of them come to us. We will continue to offer professional services, bespoke content, as well as customization services for our clients, particularly for supporting our ARR. We are delivering EBITDA margin improvements through operational gearing as well as productivity improvements. We maintain a strong balance sheet as Richard demonstrated earlier, and that gives us the optionality to acquire companies, particularly in adjacent sectors where we can acquire content and years of experience and credibility in the market, in sectors that are adjacent to the ones that we're already strong in. A big question for our investors right now is around the AI threat. That's been the reason for the recent fall in our share price, the SaaSpocalypse. Before I jump into that, it's worth briefly looking at our business model once again. I did introduce the company earlier, just want to bring up these points to demonstrate why our version of the SaaS business is different from some of the others out there that might be more impacted by generic AI. What we do for our clients is help them to make compliance simple by digitizing, automating, consolidating many of their compliance processes onto a single platform. That starts with training, but it's not limited to that. It includes declarations, registers for gifts and hospitality, for compliance breaches, and surveys and even offline events. The market we operate in is large and resilient with growing demand as companies seek to streamline their processes. Many of the companies that we take on have not put into place any kind of platform of the kind that we offer. We intend to achieve revenue growth, and we've demonstrated how we have over the past four years, as Richard showed, achieved revenue growth through both high net retention and new client acquisition. Currently, our incremental ARR dropdown to EBITDA is around 70%. That's fairly high operational leverage. This is despite us offering a very attentive, managed, responsive service to our clients. We really do invest in that. We don't cut any corners on that one. Despite that, we have a high degree of leverage here. We offer extensive content libraries and compliance tools in affordable plans that fit around the needs of our clients. We have a fantastic, well-developed sales and marketing funnel. We have optimized our marketing over the past six to nine months for the LLMs and AI Overviews and AEOs, as Richard mentioned earlier. We have a market-leading client support and account management, very attentive to our clients, really being their partner in ensuring that their staff compliance is up to scratch. We've developed our content and technology in-house, which allows us considerable flexibility in adapting it for the changing needs in the market, as well as including AI features, which are actually very accessible to us, very easy for us to develop. The difficulty or the challenge that companies like us face is in the adoption and learning what is useful for clients and what will deliver real value for them. We have an established infrastructure, both in terms of our technology and our talent. We've managed to retain our talent over the years. Most people who are with us have been with us for many, many years. We have a culture internally of embracing AI and non-AI means of maximizing productivity. With that, let me turn to what we offer to the world in terms of AI. Firstly, our clients come to us for trust and capability. The check size that they write to us is of the order of several thousand GBP. It's not a huge expense for them, given their other operating expenses. The reason they do that is not only to get some answers to some compliance questions, it is because they want to have the reassurance, they want to have the peace of mind, the comfort that they're covered for staff compliance. They want updated and verified content. They want to have a system of record for evidencing compliance, both to their internal stakeholders, top management, board, as well as to external regulators. They want us to protect their personal and HR data in a secure environment, which it spoke about our SOC 2 and Cyber Essentials Plus, and ISO 27001 certificates. They want us to help them automate their very specific and sometimes complex workflows effectively with guardrails, with audit logs, and human checkpoints to ensure that they can have the confidence in their staff compliance. We also hold a lot of their proprietary data content, their most up-to-date compliance courses, their up-to-date policy documents, and indeed all their activity data which they need to evidence that compliance. We're in the pole position to be the enablers of AI for our clients. When our clients need to deploy AI, because they are under pressure to improve their own productivity, they are unlikely to turn to generic AI tools like Claude or ChatGPT, that won't serve the purpose. They are more likely to turn to their trusted compliance providers like ourselves. The challenge for us is to develop such tools and features to get the adoption, to learn about their usage, and to deliver that value for our clients ahead of our competitors. To take example of two of the features that we have developed for our clients. The first one here in the third column is Aida, which is our AI conversational compliance assistant, which gives answers to employees' compliance questions as well as recommendations for further reading, which could be e-learning courses or indeed the company's own policy documents. We rolled this feature out to our top-tier clients last year, in the second half of last year, and we are in the process of rolling this out to all of our clients now and getting up that adoption. Second item that I have mentioned over here is also a part of Aida. This is a different feature within Aida that allows the compliance officers and administrators to customize our off-the-shelf content almost instantly to the needs of their business, to their business profile, to their risk profile, to the specific information within their business, including personnel and contact points. We have always offered this service. It is one of our USPs, something that we are known in the market for. We are now, with the help of AI, able to deliver this more effectively, instantaneously, and with much less friction. Richard already spoke about how we are adopting AI within our operations. Just briefly, the top area where we are very excited about the use of AI is product development, application development, programming, coding, where we expect to achieve 50% productivity gains this year. We have no plans of reducing our headcounts in these areas. Instead, we are banking these productivity gains to improve what we offer to our clients. AI is also helping us improve the productivity and effectiveness of our customer service. It is helping us in lead generation, in particular, our ability to outbound and reach out to clients more proactively, whereas previously we were mainly reliant on inbound leads. AI is percolating throughout our organization into all departments and teams to help improve efficiency and build new capabilities that did not exist before. With that, let me just quickly turn to our current trading in 2026. Our ARR has continued to grow. There has been a slight moderation in our new client acquisition in the first quarter of the year, but we see that getting better in the coming quarters. Our net retention has remained above 100%, and that is, again, a result, as I said earlier, of our lower than expected churn and downsells, but our upsells have similarly gone down, so hence the two have offset each other. We have increased our prices by 5% this year, and that has been well accepted by clients. It has not led to any increased churn. Our professional services business tends to be quite lumpy and with poor visibility, but we have had a really good start to the year in that area. Our EBITDA continues to trade in line with the expectations in the market as we benefit from operational gearing and the productivity gains that Richard and I have spoken about. With that, we will conclude this part of the presentation. Over to you, Alex. That's great. Thank you very much indeed, Vivek, Richard, for your presentation this afternoon. Ladies and gentlemen, please do continue to submit your questions using the Q&A tab situated on the top right corner of your screen. While the company takes a few moments to read those questions submitted today, I would like to remind you that a recording of this presentation, along with a copy of the slides and the published Q&A, can be accessed by investor dashboard. Vivek, if I may now hand back to you to take us through the Q&A session, and I'll pick up from you at the end. Thank you. Sure. Richard, I believe there's a few here for you. Do you want to pick up one for me? Yeah, certainly. The first question, how would you increase shareholder value in trying to improve the share price? First of all, as you all know as investors, there's certain things we can do internally and an awful lot of things externally we can't control with everything that's going on in the world at the moment. Our biggest thing is to just focus on what we can control, and that's focusing on growing our organic subscription revenues as we have been, and growing our EBITDA and our EBITDA margin to focus on the Rule of 40. That is the one single thing we're going to remain focused on growing. On that, some people might argue we've got a lot of cash. Could we do something with that cash to potentially support shareholder growth. Our primary use of cash, as Vivek said, would be to find content acquisitions if we can in this space. That's our priority and that's what we want to spend it on. We could potentially look at dividends or share buybacks, but that's not our preference at this point in time. I'll take the next one, which is about AI. Do we see AI as a pricing lever for increasing contract values or more of a defensive retention tool? I'd say, given our stance, you could argue that we're using it more as a defensive tool. I don't quite like the word defensive, but we're adding value for our clients with AI features so far, and we expect to do so in the near future as well, without increasing our prices on account of that. We do believe that the providers like ourselves, the vendors of staff compliance, that are doing well in the medium term, that is over the next 2, 3 years, are the ones that will leverage on AI to deliver better value, more effective and cost-efficient staff compliance to our clients. That requires scale, that requires ambition, and we believe that we're in a pole position to do that. I think the next one is, what EBITDA expectations do you have for 2026? We're not strictly allowed to give forecasts of what our projections are. But in the medium term, our plan is to get to the Rule of 40, and that's crudely to get to sort of 20% margins. Cavendish, our broker, released some research with some more detailed projections on which is available on their website on Wednesday. Next question is, despite a strong net cash position, why no M&A? Are you constrained by valuation disconnects, a lack of suitable targets, or a deliberate decision to prioritize organic growth? So definitely we are focusing on organic growth as the core way of growing, but we want to use surplus cash to supplement that growth through M&A. We are potentially constrained slightly by the mismatch in valuations between private and public sector companies. However, we have got surplus cash, so we will pay 2 to 3 times ARR for suitable targets on that basis. In terms of there being suitable targets, we did engage with a deal origination company last year, and didn't have a huge amount of success in finding targets. A lot of them weren't either relevant or weren't willing to sell. We are upping our efforts on that now and at this very moment in time, we are engaging with several sell-side brokers that we believe are experts in the markets we're looking at. So we are pursuing greater efforts in that field. That's great, Vivek, Richard, if I may just jump back in there, and thank you for addressing all those questions from investors today. Vivek, before we direct investors to provide you with their feedback, which in this particular pause it to yourself and the company, could I just please ask you for a few closing comments? Well, thank you for joining us today. Once again, I'd like to end by saying that we've delivered four years of steady, strong growth since the IPO, and we've had a step up in profitability in 2025. With the advent of AI tools, we have the opportunity to deliver more robust, more effective, and cost-efficient staff compliance to our customers. This trend favors the larger, more trusted providers like ourselves, who've got the ambition and scale to execute. This strengthens our confidence in growing our ARR, improving margins, and delivering strong shareholder returns. Fantastic. Vivek, Richard, thank you once again for updating investors today. Could I please ask investors not to close this session, as you'll now be automatically redirected to provide your feedback, which will help the company better understand your views and expectations. On behalf of the management team, we would like to thank you for attending today's presentation and good afternoon to you all.