Company Interview / AI experimentation drives returns

Andrew Smith, CEO of Credit Clear (ASX:CCR) states that the significant growth his organisation has seen can be attributed to both new client acquisition over the last year and an increase in business with existing key clients. The enhancement of revenue against a relatively stable cost base allowed the company to upgrade its guidance for the third time in the 2024 financial year. Andrew shines a light on Credit Clear's (ASX:CCR) innovative approach, which combines people-centred call centres with award-winning artificial intelligence technology. This combination has aroused considerable interest, with the result of winning a significant number of new clients.

The AI technology used, as Andrew explains, is designed to streamline customer engagements and make communication methods more dynamic and versatile. It anticipates users' preferred methods of engagement and allows for a more personalised experience tailored to each individual's circumstance. This sophisticated use of AI extends to optimising communication schedules, predicting future engagement activities based on past behaviour, and even presentation of information that users have shown interest in

Potential investors should closely watch Credit Clear's progress, keeping an eye on increasing revenue numbers, the impacts of operational leverage, and positive cash generation. Andrew also sees an opportunity for growth in the UK market, given the potential synergies with current clients in Australia and cultural similarities. He plans to use the company’s considerable cash reserves of $13.1 million to invest in organic growth in Australia and New Zealand, while also considering acquisitions in the UK to accelerate growth and add value to the total addressable market

Full unedited transcript:

0:00

I think it was a culmination of of new business that we've acquired over the last 12 months and some growth with within some existing key clients. So, uh, it's really sort of, uh, driven a lot of underlying EBITDA and profit. So one of the best parts about, you know, adding each, uh, dollar of revenue when you've got a relatively stable cost base is that we're seeing a, a large proportion of that drop through the bottom line, which resulted in us upgrading our guidance for the third time. Um, in the 2024 financial year. So, um, it's been great to continue to, um, outperform on our promises. Yeah. So, um, to your point, I think you report later in August, but today, flagging that you will be beating that original, um, you know, profit or, or revenue expectation. So just give us the details of who these clients are, why this new client base is exciting.

0:56

Well, I think the market's really responded well to credit Claire's, um, combination of of progressive, innovative technology, um, supported by, um, people in call centers. So the combination of, of award winning artificial intelligence technology that does collections, um, and also allowing people to talk to people on the phone. So that's driven a huge amount of interest over the last couple of years and resulted in us winning, uh, um, in excess of 70% of all the tenders we've gone for. Um, those clients have taken a little while to onboard, to deploy to, to ramp up, and we're now seeing the fruits of the labor flowing through in terms of revenue and naturally dropping through to the bottom line. Okay. So we are expecting to see FY 24 revenue of between 40 and $42 million on underlying earnings of approximately $4 million. That's compared with the previous forecast of $3.7 million. One would think a lot would need to go wrong

1:56

between now and the end of August for that to change. But what has been going right in this most recent period, you know, since we've changed over this financial year, like our, our, our people spending,

2:12

uh, well, sort of people are still spending. Um, just wanted to correct one thing is that our, our, our revenue will be $42 million. Um, you know, not 40 to 42. So we're finishing above or at our top line of our guidance in terms of revenue. Um, and, and obviously, uh, 4 million in terms of underlying EBITDA as well. So, um, we've increased our guidance from an EBITDA perspective and, uh, we meet our very top level of guidance in terms of revenue. So, um, that's great news. Um, once again, what's driving that? Um, you know, there's is there's less competition than there was a few years ago in this space. Um, there's been one listed company that when an administration that was heavily involved in debt buying, which is probably not the market that we want anything to do with, we we assist our clients, uh, recover money from their customers, uh, without buying it. Um, and second of

3:11

all, there's been some consolidation within, uh, major operators within the sector as well. So, uh, less competition and, uh, critically. Bringing a very new innovative approach to the way that we solve overdue, uh, accounts receivable issues on behalf of our clients in the utility space, telco, insurance, government. So, you know, lots of those sectors have experienced challenges associated with cost of living pressures, um, interest rates and inflation, you know, remain high. And, um, that means that there's more organizations and customers that that require our assistance to resolve those overdue, overdue debts. Yeah. Okay. So it's almost like you can stand to benefit in a tricky environment as people need to use the technology to recoup their invoices. So this this AI experiment, I find it kind of interesting that you're calling it an AI experiment because everybody's trying to get AI into their releases to

4:11

show how they're able to use the technology, um, to improve outcomes. Um, because we all know that we can use jet GPT, but what we want to know is how it can actually improve the outcomes, you know, in a financial metric. So how would you phrase where you think you'll be able to take this AI plus human interaction. So it's a it's a fantastic question. I appreciate you asking it. Um, look, critically has been involved in the development of AI for the many years and in fact, uh, won multiple awards for the best use of AI within an Aussie fintech. Um, for the last three years running. So, um, you know, we've been, I think, pioneers in terms of AI well before it was popular or a buzzword, and And we're using it in an industry that is, you know, in some respects quite backwards in terms of the embrace of technology. So what we're what we're using AI to do is to anticipate, um, how and,

5:11

and when, um, uh, users want to engage with us. Um, and we're seeing a shift from traditional methods of collection being phone based, um, or letter based um or static email based to a more dynamic two way, uh messaging service, either delivered through email or through text messaging or WhatsApp. So what I is doing in our industry or for credit here is, is actually making the engagement, uh, with our clients customers in what can be a challenging time for them if they can't pay an overdue bill. Uh, in a way that's reduced the level of friction. Some people don't want to speak to people on the phone. They'd rather, um, you know, deal with this issue in the comfort of their own home, uh, agree to a payment arrangement that suits their financial situation. And and what the AI does is

6:10

anticipate whether or not, you know, someone's likely to, um, either, uh, respond to a text message, respond to an email, respond to a phone call, or even respond to a letter. So choosing the best method for communication is one. Um, also trying to anticipate what time of the day or the week, uh, someone's likely to respond to that message or email. Um, so it's really about maximizing the chances of engaging with someone. And even when they, uh, click or open a message or an email and they and they click on a, you know, a potential payment arrangement, the next time we communicate with them, we're presenting them with information that they've showed interest in in the past. So, you know, we're drawing upon, you know, tens of millions of interactions that we've had over the past, you know, 7 or 8 years at credit Clay and building algorithms to predict, uh, what's going to improve the engagement. Uh, clearly the the recovery rate that we get on

7:10

behalf of our clients. And last of all, uh, customer satisfaction in terms of a Net Promoter score that endorses the fact that despite the fact we're involved in, you know, a collections of an overdue, uh, debt, we're We're still getting a very positive outcome in terms of user experience. So those are the things that, you know, I think we're leading the way in this industry on. And you can take it further. Can you? Oh, absolutely. I think the, the um, it's limitless in terms of how you can utilize AI. Uh, what is limited is in terms of the that the resources we have at hand in terms of our technology team, which at the moment is 100% onshore, we've kept investment into that team over the last 3 or 4 years, despite the pressure to sort of focus on, you know, improving profitability. But, you know, we believe that we had a lead in terms of development of AI and technology in this space, and we wanted to make sure that we were prepared to, um, you know, invest for a long term return. And, and I'm pleased to

8:10

say that we're starting to see, you know, recognize those benefits now. Interesting. Okay. Now, when it comes to well, you've done some hard work when it comes to cost out already. Yeah. Two part question. Is there more on that front to come? Also noting that you've got $13.1 million in cash in the bank. So you know what type of growth opportunities will you potentially use that to fuel.

8:36

Yeah. Look, we'll continue to invest in sales and marketing to grow organic organically and in certainly Australia and New Zealand markets. Um, I've just come back from a trip in the UK where there's some real synergies between, uh, organisations that we work with in Australia that have, uh, relationships with companies in the UK. So I think naturally, uh, the next move for us is to look for an acquisition in the UK where we can, uh, deploy the technology, um, take that innovative approach to a very old issue around collecting overdue invoices and hopefully accelerate growth and our total total addressable market through, you know, first go into the UK, which I think we have, you know, lots of synergies with, um, uh, based not just in terms of customers that we work with in Australia, but in terms of cultural similarities as well. Got it. Um, look. Thank you. Good day of markets today. Shares have been doing well, um, over

9:36

the past year or so. So any key catalysts that investors or potential investors should be looking out for now.

9:44

Oh, look, there's been a couple of catalysts. One was coming cash flow positive. Um, really pleased to to see the the fifth foresee, um, in terms of positive cash generation. Uh will be put out. So that was a real big catalyst for us as an organization. And then seeing the operational leverage, um, in terms of each additional dollar of revenue added to the businesses dropping through the bottom line in terms of underlying EBITDA. So, you know, watch the watch these, um, uh, numbers in terms of, you know, as the quarter moves on. And so we start to release some guidance for FY 25, uh, look to see us, uh, be, you know, certainly robust in terms of our guidance from a revenue perspective. And, uh, look, the majority of that new revenue should drop through the bottom line. So they're the things that we've set up ourselves to have a very strong FY 25.