Company Interview / What's behind Kinatico's 230% profit jump?

Key points:

Kinatico (ASX: KYP) seeing a 90% YoY SaaS growth rate and improved underlying performance due to the value of SaaS revenuesA strategic evolution from data verification and screening services to comprehensive workforce compliance managementFuture focus on streamlining the customer onboarding process onto the platform to accelerate revenue generation

Michael Ivanchenko, CEO of Kinatico (ASX: KYP), elaborates on the recent increase in the company's net profit after tax at the end of FY24 by 230% to $0.8 million and a 41% increase in earnings to $3.7 million. Reflecting on a fruitful year of product development, Michael goes into detail about how the company's software-as-a-service (SaaS) product simplifies workforce compliance, saving clients time and money. There's been a 90% year-on-year growth rate of the SaaS product, boosting the value of SaaS revenues and improving the underlying performance of the company.

Additionally, the strategy behind Kinatico's (ASX: KYP) service evolution is further unpacked. Initially providing data verification and screening services, under Michael's guidance for the past two years, the company's focus has shifted towards comprehensive workforce compliance management. This change has extended the use and necessity of the platform throughout an employee's lifecycle, making it an indispensable tool for businesses today.

Michael further underscores the company's current geographical footprint in Australia and New Zealand, noting a significant growth in sectors like healthcare, aged care, and education, alongside unexpected patronage from the Victorian Government and the Federal Department of Health. The future focus is on streamlining customer onboarding onto the platform to accelerate revenue generation. This strategic approach, combined with a unique and simplified approach to compliance, is what sets Kinatico apart from its competitors, typically Excel and specialised compliance firms.

Full unedited transcript below:

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Workforce compliance management firm Kinatico has reported an increase in net profit after tax of 230% to $0.8 million of FY 24 earnings, up some 41% at 3.7 million from the previous corresponding period. Looking forward, the company planning to grow its SaaS market share, notably through the implementation of new user interface. Lets checking in on the price. It is off today, but let's get some greater detail now to get the story behind those numbers. Chief executive Michael Ivan Jenco joining us now Michael, welcome. Congratulations on the result. Thank you very much. Sum it up for us. What are the highlights for you? So this year has been one of execution and finding product market fit for our SaaS product. That simplifies workforce compliance in in an environment When compliance requirements for organizations are getting heavier and expectations about immediacy of reporting or visibility of those in real stats, it's become a real administrative overhead and a real

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cost. Our solutions actually simplify that entire task, saving them time and therefore money, allowing them to focus on the actual core task of the business and in providing that service. What we found is we've had very strong uptake. It's driven. We've had a basically 90% year on year SAS growth rate. The value of that SAS revenue has also led to the improvements in the impact and all of the underlying performance.

1:38

Just as to what you do, those people may be unfamiliar. And so you were what you your legacy business, if you like, was transactional data verification and screening. So you've now moved on from that. As you say, it's about workforce compliance. So so what was the difference there. Was that actually a great question? So the I was actually brought into the company now about two years ago to build a SaaS business. And what I found was the company providing those verification and screening services at a point in time was not actually a value add. So digging deeper into why companies need that information then unravels all of the other bits of information that organizations need in their day to day operations beyond that initial screening. So whether it's policy and procedures, whether it's verification that everybody has done their quarterly cyber security training or anti-harassment training, or do are there other policies and practices that I need to do at the start

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of my shift of my workforce, all fundamentally needs to be captured, collated and organized. And so the the extension of one sector of information, which was pre-employment, has been extended right through the employment lifecycle. Where where's your footprint at the moment? So Australia and New Zealand and sectors where particularly strong in mining and industrials, but also our largest growth area over the past 12 months has been health care and aged care and disability care.

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And then on top of that, education and unexpectedly, while not one of our targets, government. So picking up numerous Victorian government agencies and now federal Department of Health is also using our solutions. That just reeks of red tape, doesn't it? So that's what you're trying to address.

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Yeah. Okay. And for instance, you know, talk about disability services I guess the NDIS 100%. Yeah. All right. So, um, what what's the growth opportunity then? Can you talk about your pipeline? I what I can talk about is that the, uh, we have been overwhelmed by, uh, the amount, the degree we've found product market fit. So our pipeline right now is very strong. What we are looking for into the future is making sure that we can bring those customers that we secure onto the platform faster to actually get them generating revenue earlier. And that's the focus for this year. So we can start translating the number of customers that we've been bringing on our customer acquisition rate over the past year, I think. Top of my head is circa 100% increase in SAS customers. Uh, but a lot of them have only come on later in the year. So we haven't seen the revenue effect yet. The developments and things we're doing in this coming year is all about self configuration, self-service for

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organisations. So they can take our software and start using it much faster than us, high end holding them for the initial deployment. What do you do differently perhaps that others don't? What's how competitive? What's the secret sauce and the USP? Well so what is this competitive IT our biggest competitor is Excel okay. Organisations have lots of manual processes of build up over time. And today they've found we have too many to actually continue to manage. You then get specialists. So I will do compliance management for construction or something. Some other sector. What we do is I don't we're not focused on what your compliance requirements are because the organization themselves know that way better than we do what our USP is, the uniqueness of our platform is that we focus on making it easy for workers and organizations to interact to meet that requirement. And so upfront we configure

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the compliance needs of an org and whatever they may be. But it is the I'll keep using the phrase it's the simplification and removing of overhead. That is our key benefit. What's your growth strategy then focusing on Australia and New Zealand. Yes. Um, beyond that, uh, we have one step at a time, one step at a time, but big plans. And again, in terms of this switching of, you know, when we were just a verification or data screening business, you're reliant on local back to source connections. We have interfaces to government and educators and a whole range of others that doesn't translate internationally. What we're doing now does because the compliance requirements may change in other places. The ability to implement them simply and get accuracy and immediate visibility applies globally. Now, the inevitable question I yes, how does that play into your business? Look, it's a really interesting

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toolset. So where we found a lot of use for it initially now is uh, the at the back end processing and collating of the information. We certainly have, uh, initiatives going on in that area and deployments that we've done. It's not something that I see is, you know, the the magic. It's okay. We've now got our the problem solved. But it is a fantastic tool set that we subtly embed across the platform.