Good morning, good evening, good afternoon, wherever you are. Welcome to the 86th Emerging Growth Conference and day one of our two-day virtual investor conference. I'm Anna Berry. Just a few notes: today we're running until about 4:50 P.M. Eastern. When we switch to the next company, you'll see a black screen for a moment. Don't go anywhere. That's just us moving to the next presenter. If you do experience downtime, refresh your browser. Everything usually works properly once you do that. Our platform does work best on Google Chrome, so if you're watching from an Apple device, you have to hit the play button to start the session. During each company's presentation, you can submit questions through the webcast module, and we will attempt to address as many of these at the end of the presentation.
All of our conferences are uploaded to the Emerging Growth Conference YouTube channel, so please subscribe: youtube.com/emerginggrowthconference. Let's begin. Happy to welcome back Edmund Ryan, CEO and co-founder of Kneat.com, a maker and validation software used by most of the world's largest life sciences companies. It trades on the OTCQX under the symbol KSIOF and on the TSX under the symbol KSI. The last time, Edmund, we had a full update, Kneat.com's annual revenue was $34 million. Here we are today, not even two years later, and Kneat.com's annualized revenue is nearly twice that. Congrats. Kneat.com has been doing very well. Welcome back to the conference, Edmund, and please walk us through all of this progress.
Great. Great to meet you again, Anna. I look forward to discussing Kneat.com with you again. Over the next 10 to 15 minutes, I've got a slide deck that I'm going to walk through. I'm going to kick off on that now, if that's OK with you. Thank you. First of all, I'd like to point out our safe harbor statement. There may be forward-looking statements in my presentation, which represent Kneat.com's expectations as of the date in this presentation. There's no guarantee that these statements will be true in the future. Just to summarize why Kneat.com is an investment opportunity, Kneat.com is the market leader in its space, validation for life science companies. It has great customer retention. It has great revenue retention. We present our revenue retention once a year, net revenue retention. At the end of 2024, that was 151%.
Strong organic growth in the life sciences space. We continue to improve our margins quarter over quarter and year over year. It has a very strong executive leadership team who is very knowledgeable in the domain that it serves, that is the life sciences manufacturing primarily. It's a very quality-focused culture where our technology is delivering compliance and right first-time testing and audit trails around a lot of information and data that's needed to satisfy regulatory bodies such as the FDA. It's a very quality-focused culture. Our purpose in life is to help life sciences to develop, manufacture, and deliver their therapies to their patients to the highest quality standard. That's a huge mission in our company. Our employees really love this mission. A lot of our employees come to join Kneat.com for that reason. What is validation? Validation is a subset of quality.
In our customer space, the VP of Quality owns the problem of validation. Health care companies must test every system, every piece of equipment, every computer system before they can put it into manufacturing to make sure that it will manufacture products to a high safety standard. These results that are captured as part of this validation activity must be documented and available to demonstrate that you have complied with the regulations in the future. You must be able to show all this evidence and all this documentary audit trails to the auditors when they come to visit your manufacturing facility in the future. If testing is not adequate, the data is not trustworthy and robustly documented, then the company is out of compliance. This is a huge need for these organizations.
It's a huge ability to de-risk their business to ensure that they comply with the regulations in real time as they do their work across our global organizations. It's de-risking their business ultimately. What does validation include? There are many different workflows in the validation processes. There are multiple different validation workflows, everything from cleaning validation to computer system validation to equipment validation to method validation, cold chain validation. These are all different use cases or workflows that reside in the validation space. Each one of these workflows has its own cohort of users. Obviously, these users are replicated across all the sites globally within these organizations. Today, this slide shows you the logos of the 20 global biggest pharmaceutical companies in the world. The majority of these companies are customers of Kneat.com. Validation extends beyond the pharma manufacturing.
Everything from the engineering and the supply chain and the distribution that surrounds this pharmaceutical manufacturing is part of the life sciences total addressable market (TAM) that we define as. When you look at the, we're talking about the manufacturers of biopharma, medical devices, consumer products in certain places, must all comply with these regulations. Validation is a necessary need within these regulations. In these focus areas underserved today, manufacturing and supply chain, everything from sourcing to manufacturing to distribution, delivery, storage, everyone in these categories or these subsegments are typical customers for Kneat.com. When we look at our market opportunity for e-validation and beyond, today we're looking at life sciences, everything from pharmaceuticals, medical devices, chemicals, health and personal care, diagnostics, et cetera. When we look at that, we see a TAM of $2 billion in annual recurring revenue (ARR), US dollars in annual recurring revenue.
When we look beyond that core that we are operating in today, and we look at the adjacencies, the customers are asking us to go to, and that we are obviously looking at in detail and looking at where we may address these needs in the future. We see a TAM of $7 billion in annual recurring revenue in US dollars. We look beyond that further. It goes up to $15 billion. That's further into the distance for Kneat.com. Kneat.com has a very compelling value proposition for its customers. Our customers are seeing everything from 50% to 60% savings in the man-hours associated with all these validation activities, the documentation mentioned, and the data management. This is also reducing the time to market. The time needed, review and approval time of all the data and documentation is cut in half also.
We're actually enabling our customers to get to market faster. We're also making them more efficient. Most of all, we're helping them be compliant with the regulations in real time as they do their work. This is something that is highly valued in these regulated industries. When we look at our annual recurring revenue, Anna alluded to the growth at the very start. When we look at from 2021 through to 2025, we're continuously growing our ARR year over year at a very significant pace. Anna, that's my presentation. If there are any questions from your audience, please feel free to ask them.
Wonderful. Thank you, Eddy, for that overview. It's clear how much easier, cheaper, faster, and higher quality validation is for companies when it's done digitally. We saw some ROI numbers in there of 50% savings in labor hours, cycle times, approval times. What's less clear is why more companies are not digital already. What are they using today? What finally prompts them to make the switch?
Good question, Anna. These companies are generally traditionally conservative, and this is a complex process, a regulated process that they need to digitize. One of the things is digitalization is demonstrating real value when it's done correctly. Prior to Kneat.com, they had traditionally been using hybrid paper-based processes, and they all are aware that these processes are not future-proof and that they can't take them to a digital future. Kneat.com has come along with a product that delivers real business value, like I said, 50% reduction in the man-hours, but also right first time compliance, which is a huge need for the industry. They're seeing that there is a solution now that can digitalize these processes, and they're engaging in that. They all realize that paper is the old way, and every CEO out there has a digitalization strategy.
Kneat.com was one of the fastest growing public software companies. When we last spoke, I think it was about three years ago. Kneat.com is still one of the fastest growing public software companies on the TSX. How has Kneat.com sustained this growth?
Yeah, it's the quality of the technology that we're developing and delivering to our customers. It's also the quality of the customer base that we serve. We are a real, true land and expand platform. We own the, from our perspective, our position in the marketplace is one easy-to-use platform for all your validation workflows your way. We're the only ones that can really say that in the marketplace today. When a customer starts with us, they may start for one of those workflows that I spoke about earlier on. They will digitize that first, then they will move to other workflows and expand that across multiple sites. If we take Merck, who's one of our biggest customers, they started off with one workflow and now they're at eight workflows across 27 sites for 12,000 users worldwide. They expanded that over a three or four-year period.
There's a huge land and expand opportunity within these customers that we are signing. We continue to sign strategic customers. Like I said, the majority of the top 20, eight of the top 10 are customers of Kneat.com. They're all on that expansion journey. We announce to the market on a regular basis customers that we see as strategic when we sign them first. We're saying to the market there really is that these are what we consider strategic customers and that there's a strong land and expand cadence for these customers into the future.
If expansion is the largest revenue growth driver, what prompts a customer to expand? Do you give account managers pointing out opportunities to leverage Kneat.com, or are partners doing this? Talk a little bit about customers themselves and where they'd like to use the platform.
Yeah, all of those apply, Anna. One thing I will say is that we're really in a great place that our customers see the value of our technology. This platform has been designed and developed over a long period of time by pharmaceutical manufacturing engineers, people who understand the business intimately, built from the ground up. That's coming through in the response we're getting from our customers. The big thing here is, like I said, I referenced Merck earlier on. Merck expanded to eight processes automatically. They know that when they're purchasing the platform day one, they're purchasing a platform that they want for all validation workflows worldwide over time. They may start with one workflow, and then they'll scale to all these over time. Our customers are pulling. There's a large part of pull coming from our large customers.
Also, our own solutions engineers are showing our customers other solutions they can go to based on what other customers might be doing and all of that. We also have partners who are working closely in the space who are also showing customers new solutions and new things they can do on our platform. The breadth of our platform continues to expand all the time, even with people out there who are identifying new things they want to do on it. As I said, the key thing to say, and it's important for your audience here, is that Kneat is a platform. It's not a solution to one problem. It's a platform, a zero-code platform where you can create your own solutions to your problems.
The total addressable market slide shows Kneat.com's definition of life sciences. That includes pharma as well as a number of other areas that are not technically pharma. What are some of the other verticals? Talk about some of those and what differences are involved in selling to these non-pharmas or deploying Kneat.com's licenses within these non-pharmas, please.
Yeah, one of the things is today we see our life sciences, we call it the life sciences TAM for validation. We see that as a $2 billion total addressable market. In there, we include biopharma and pharma manufacturers, medical device manufacturers, contract development manufacturers, and development manufacturers, research laboratories, everything in the supply chain of getting a product to market, a pharmaceutical product to market, and medical device to market. We also have consumer product goods companies who are also making products such as cosmetics and things that come in contact with the human body. They also must comply with regulations from the FDA perspective. They're also companies that we work with. There isn't, outside of that, we're not diluted from a focus perspective because every segment there requires the same type of people to engage with them and the same type of product.
We're working in the same, that's our one space. When we go beyond that, we will need probably additional capabilities.
Kneat.com spends a lot on R&D. What’s being built there? How do you expect these investments in R&D to generate returns?
That's a very good point. We do spend significantly on R&D. I explain to people the reason that is the case is we're not building a solution for one problem. We're building a platform that customers and partners and ourselves can configure solutions for our customers. We're building the future today as we build for our customers today. We work real close with our customers. We're very close to them, and we understand what they want in the future. We understand what they want now. As we build, we're building the future. It's not one solution for one problem. It's multiple solutions for multiple problems that we're building, hence the expensive R&D side to the coin.
Eddy, Kneat.com does not give guidance, but you do give some KPIs to help investors think about the numbers, with net revenue retention being one of those. It was 151% last year, which is pretty good. What makes customers so sticky?
That's a great question. This is a mission-critical process that we're solving, that we're digitizing. They're putting all their data pertaining to their products into the Kneat.com system. They need to retain that data and that audit trail and that documentation for many years into the future. When the auditor comes, such as an FDA auditor, they must be able to retrieve that information and demonstrate it to the auditor. The data is very sticky. It's a complex process. There's a lot of information created in documentation and data. There's a huge amount of data integrity required. There's a huge amount of audit trail. There's a huge amount of electronic signatures involved in these processes. The data is king. The data availability is critical. It's a mission-critical process. They need that information for many years into the future to be audit-ready.
It's a very sticky solution, as you can imagine from that.
There have been some changes to life sciences in the form of tariffs and research funding. How have these developments impacted Kneat.com's business?
Yeah, that's true. There is a macro uncertainty. I would say that it hasn't significantly impacted Kneat.com, although there are some issues here and there, some budget stalling or whatnot, but nothing significant from Kneat.com's perspective that we see today. The one thing I will point out is that we are global. We're everywhere globally, our people. We support our customers wherever they are. If they're manufacturing in the U.S., we'll support them there, as we do. If they're manufacturing in Europe or Asia, we'll support them there, as we do. I think it doesn't matter where our customers expand. We'll be there to expand with them. That's the key thing from that perspective. Nothing significant. Budgets, a bit of uncertainty around where customers are going to spend their next capital expenditures, but nothing significant from our perspective.
Since expanding into computer system validation and drawing app, is Kneat.com seeing increased deals with these as the initial land product, or are these more used to upsell?
Absolutely. They're both. As I said, we cater for maybe 10 different workflows. CSV is one of those. Equipment validation is another. We can start in any one of those areas. When the customer has configured that module, they can go to the next one and move on. As Merck did, they went to eight different modules over a three-year period. CSV is a big opportunity for us. Our customers are really engaged in our journey there, and we're satisfying CSV customers both in the business and also on the IT side of the business.
In constant currency, how much ARR was added sequentially last quarter?
How much ARR was added sequentially last quarter? I'd have to have a look at that. I think on quarter two, I believe it was around the 2% to 3% mark. There was a significant foreign exchange headwind on that quarter. Year over year, order of magnitude of around the 40%. I always actually point out to the investors and the like that to look at Kneat.com as a year-over-year company as opposed to a quarter-over-quarter company. As I said, some of these customers are big. They have big expansions, and they may not land in the quarters that we expect them. They by and large land plus or minus a quarter or two.
there any updates on the Capgemini and other large partnerships? Are any of those evolving?
Yeah, we have a very strong partner network. We have partners at the large systems integration partners. We've also got boutique partners. I would say that there's a lot of opportunity discussion ongoing with these large partners. They're something that will take a longer period of time to evolve. I would see them more involved in integrations with our products, with other products in the customer's environment at this point in time. There's a significant amount of, I would say, opportunity coming from the partner channel at large.
Perfect. Is Kneat.com seeing any uptick in Veeva in the field, or is competition mostly still ValGenesis and pen and paper?
Yeah, I think the latter. Veeva is entering the marketplace with a product. It's early goals for Veeva, and they're having some, I believe they're doing some pilots and whatnot and a bit here and there. There's nothing significant that they're announcing at this point in time. Kneat.com is, generally speaking, when these customers are making big decisions for products for a complex process, it's validation. They evaluate very carefully here, and hence, they're evaluating for a global solution. Kneat.com is very, very strong. Kneat.com is 10 years in the marketplace and proven maturely to scale across these big global organizations. Kneat.com, as again I say, one platform for all your validation needs. No other company in the marketplace can say one platform for all your validation use cases, workflows like we can.
Any thoughts on listing in the U.S. to close the valuation gap versus other vertical SaaS companies?
We would always be looking at strategies, Anna. I think there's nothing in casting stone today. We would always be evaluating what's the right opportunity for the company. Today, it's execution mode. We're in execution mode big time, and we want to continue to scale this company. We believe we have a great team, great technology, and we want to continue to reap the rewards of that for our investors.
Perfect. Talk a little bit more about how AI might help and disrupt Kneat.com.
Yeah, I don't think AI is going to disrupt Kneat.com. It'll always have some impact. From our perspective, it's Kneat.com plus AI. It's AI supporting Kneat.com to be even more valuable for our customers, to deliver more and more value. We have a strong AI ongoing works, strong AI team, and a strong AI journey in play. We are talking closely with our customers around what's the highest value for them. It's Kneat.com plus AI into the future.
Are you noticing more hesitation from customers given policy uncertainties in the health care industry?
As I said, it's a bit like the, I guess it's a little bit like the macro climate, Anna, that question I answered earlier. I would say that we're not seeing any significant impact on our business. What I would say is that we have a huge value proposition. Digitalization is a mandatory process to get to more efficiencies, to get to quicker time to market, to get to compliance, a higher level of compliance. You can start out in Kneat.com with one workflow, maybe $100,000 a year in the ARR, and you can continue to expand every year. It's not a big starting point from a customer's perspective, especially a large customer. By and large, I think that's playing well for us. I'm very happy with that. Nothing major there to report, Anna.
Can you describe what validation means?
Yeah, validation is really documenting and testing everything that's involved in the manufacturing of a regulated product, such as a medical device or a drug, you know, pharmaceutical product. You've got to design and test all your facilities, all your equipment, all your computer systems, all your processes to ensure that there is a strong capability there that they will consistently manufacture products to the right efficacy and the right quality for the patient. There will be no adverse effect on patients. This is an ongoing process. Any time they change anything, they must revalidate the system if it's a critical system. This is about everything they have. They must validate everything they have in the manufacture of a critical product, which is really like detailed testing.
What is your biggest challenge today? What do you think is the biggest risk for Kneat.com?
From our perspective, our goal is to continue to grow. We believe we should be a huge company, a great company. We have a technology platform that we developed from the ground up that's second to none. There's huge IP built into that platform, and we believe that deserves to be a great company. Our goal is to scale and continue to scale. Of course, there will be macros and stuff like that. I think the beautiful situation from our perspective is we help our customers no matter where they are. The challenges for us are to continue to execute every day. We have a great team, and we continue to build that team. Nothing significant jumps out at me there, Anna, regarding risks.
Can you talk a little bit, you can close with this as well, talk a little bit about the revenue verticals and your expected growth rate?
Yeah, we don't do guidance. Just look at our past from our growth perspective, and we expect to continue in the same vein. It's all about growth, but we also would be prudent about that. We would also be looking to hit a break-even point in the not-too-distant future. If you look at our numbers, they're converging towards break-even sometime in 2026. Today we will continue to operate in that $2 billion TAM, but we're also looking at our adjacencies, which our customers are bringing us to and asking us to solve problems for them there. We'll be leveraging the same technology by and large to solve the problems in the adjacencies. Today, it's a $2 billion TAM. Tomorrow, in the adjacencies, it's a $7 billion TAM. Look at our past to judge our future.
Think about a team that's building a strong structure here, building a strong team, hitting a real strong cadence when it comes to bringing out right first time technology, high-quality software for a highly regulated space.
Perfect. Thank you, Eddy. We appreciate your time and very positive update coming back on the conference. Thank you so much.
Thank you, Anna. Nice meeting you again.
All right, everyone. We'll be right back.