Closing the gap between current and future workforce capability - PowerPoint PPT Presentation

LON:LTG Closing the gap between current and future workforce capability Learning Technologies Group plc 2019 Final Results Jonathan Satchell Neil Elton Chief Executive Chief Financial Officer 16 April 2020

2019 Strategic and Operational Highlights Strategic Highlights Excellent progress towards achieving our 2021 strategic goals • Acquisition of BreezyHR in April 2019: • leading talent acquisition SaaS platform that deepens LTG’s presence in ‘SMB’ • market complements PeopleFluent enterprise solution • Acquisition of Open LMS on 31 March 2020 provides foundation in open-source LMS • market with numerous cross-selling opportunities; immediately earnings enhancing Operational Highlights Increased recurring revenue; improved margins; strong cash generation • Emphasis on generating profit from mature software businesses to invest in R&D and • high-growth opportunities Successful launch of Instilled LXP and VectorVMS mobile app • Cross-selling initiatives; increased success in delivering comprehensive software and • services solutions to large corporates

2019 Financial Highlights: strong delivery and balance sheet Organic Revenue* Revenue (£m) Revenue 130.1 2019: £54.1 m CAGR 59% 93.9 2019: £130.1m (2018: £49.8m) 51.4 +39% S&P +6% (+11% 3 Year CAGR) 2017 2018 2019 (2018: £93.9m) C&S +4% (+5% 3 Year CAGR) Adjusted EBIT (£m) Adjusted EBIT Adjusted EBIT Margin 41.0 CAGR 80% 2019: £41.0m 2019: 31.5% 26.0 +58% 12.7 (2018: 28.0%) (2018: £26.0m) 2017 2018 2019 Adjusted dEPS Adjusted dEPS (pence) Net Cash/(Debt) CAGR 57% 4.7 2019: + £3.8m 2019: 4.736 pence 3.2 (2018: -£11.5m) 1.926 + 47% Plus headroom in committed loan (2018: 3.232 pence) facilities of $21.0m 2017 2018 2019 *On a constant currency basis and excluding acquired PeopleFluent business, CSL contract and rental income Figures reported on a statutory basis: PeopleFluent acquisition completed on 31 May 2018, Watershed acquisition completed on 15 November 2018 and BreezyHR acquisition completed 17 April 2019. 3

Financial Highlights Review Neil Elton Chief Financial Officer 4

Revenue: enhanced sustainability and diversification of earnings Increasing recurring revenue LTG's top 10 clients Revenue shift Content & Services Software & Platforms Recurring Non-recurring Top Client Clients 2-10 Others 100% 100% 100% 52.1 80% 26% 90% 90% 62% 60% 48% 85% 88% 32% 36% 80% 80% 40% 62% 25% 20% 59% 70% 70% 12% 13% 10% 3% 2% 0% 2017 2018 2019 60% 60% Increasing international footprint 50% 50% 74% UK US ROW 40% 40% 100% 68% 16% 15% 64% 17% 30% 30% 80% 52% 30% 60% 41% 20% 20% 56% 65% 38% 40% 10% 10% 54% 20% 27% 20% 0% 0% 0% 2017 2018 2019 2017 2018 2019 2017 2018 2019 5

Divisional Performance: Software & Platforms/Content & Services Software & Platforms YOY revenues increased by 48%; • BreezyHR contributed c8 months Revenue (£m) (£m) EBIT EBIT Margin with a full year impact from PeopleFluent and Watershed 35.0 40% 100.0 Most customers take multi-year • 30.0 35% 80.0 licences, invoiced and paid 25.0 30% annually 60.0 20.0 25% Increased retention rates in • 15.0 20% 40.0 acquired PeopleFluent business 10.0 15% 20.0 • 6-9 months enterprise software sales 5.0 10% cycle 0.0 0.0 5% 2018 2019 2018 2019 Margins increased from 32% to 36% • Content & Services (£m) Revenue (£m) YOY revenues increased by 21% • EBIT Margin EBIT primarily through full year impact of PeopleFluent 50.0 10.0 40% LEO, Eukleia & Preloaded increased 35% • 40.0 8.0 revenues by 8% YOY 30% 30.0 6.0 25% PeopleFluent Learning professional • services revenue declined by £0.7m 20% 20.0 4.0 after ceasing LMS customisation 15% projects 10.0 2.0 10% 4-6 weeks content/services sales cycle • 0.0 0.0 5% 2018 2019 2018 2019 Margins increased from 20% to 23% • 6

Quality of Earnings: strong margins and EPS growth Strong margin growth EBIT EBIT margin 45.0 31.5% 35.0% 40.0 27.7% 30.0% 24.7% 35.0 22.3% 25.0% 30.0 20.0% 25.0 15.6% 41.0 20.0 15.0% 15.0 26.0 10.0% 10.0 5.0% 12.7 5.0 6.3 3.1 0.0 0.0% 2015 2016 2017 2018 2019 Strong EPS growth Dividend Per Share ROCE* DPS 18.00% Adjusted dEPS Basic EPS Dividend cover DPS Postponed 16.00% 16.44% 5 6.01 6.46 6.31 14.00% 4.5 0.8 4.736 13.32% 4 12.00% 0.7 0.75 3.5 11.01% 10.00% 0.6 3 3.232 0.5 8.00% 2.5 0.5 0.4 2 1.628 6.00% 0.3 1.5 1.804 4.00% 0.3 0.655 0.2 1 0.235 2.00% 0.1 0.5 0 0 0.00% 2017 2018 2019 2017 2018 2019* 2017 2018 2019 *Return On Capital Employed (’ROCE’) = Adjusted EBIT / (Assets – Current Liabilities) 7

Cash Flow and Financing: continuing strong cash conversion 2019 Cash Flow Bridge £m £'m Cash outflows Cash inflows Net debt Cash cost of acquisition net of cash acquired (8.8) 50 Transaction costs (0.2) Net Cash on acquisition of BreezyHR (9.0) 40 40.2 (5.7) 30 (0.7) (3.3) (9.0) 20 (4.0) (2.3) 10 (0.6) 0.7 0 2018 c/fwd Operating Development Purchase of PPE IFRS16 lease Net cash on Dividends paid Deferred Issue of shares Currency 2019 c/fwd -10 cashflows of intangibles payments acquisition of contingent changes BreezyHR consideration -20 and earn-outs -30 paid -40 -50 Operating cash conversion* New Bank Debt Facility as % of adjusted EBITDA 5 year loan with Silicon Valley Bank and Barclays Bank from May 2018 • 120% 100% $63m facility includes $42m term loan and $21m RCF • 101% 92% 80% 84% 83% • Additional uncommitted $28m accordion facility 60% 40% Financial covenants: • 20% • Cash Flow cover >1.0 / Leverage <2.75 0% Net cash of £3.8m at 31 December 2019 (2018: net debt of £11.5m) 2016 2017 2018 2019 • *Operating cash conversion % is calculated by dividing operating cash flows (adjusted for acquisition-related deferred consideration payments, transaction and integration costs, interest and tax paid, exceptional realised FX gains, payments of lease liabilities and the movement of deferred upfront investment outflows relating to the CSL project) by adjusted EBITDA. 8

Accounting policy changes: IFRS16 and share based payment charge With effect from 1 January 2019 the Group has adopted a new accounting standard: IFRS16 – Leases and has elected to report Adjusted EBIT inclusive of share based payment charge. 2018 2019 £’000 £’000 Adjusted EBIT pre accounting policy changes 27,245 43,255 Adjusted EBIT margin (%) 29.0% 33.2% Share Based Payment charge adjustment (1,254) (3,111) IFRS16 adjustment - 878 Revised Adjusted EBIT 25,991 41,022 Revised Adjusted EBIT margin (%) 27.7% 31.5% Adjusted diluted earnings per share (pence) pre accounting policy changes 3.232 4.673 Revised adjusted diluted earnings per share (pence) 3.232 4.733 1 Jan 2019 31 Dec 2019 £'000 £'000 Right of use asset 11,938 9,864 Lease liability 14,465 11,957 Of which: Current liability 2,831 2,880 Non-Current liability 11,634 9,077 9

LTG Strategic Review Jonathan Satchell Chief Executive 10

LTG in the corporate digital talent management and learning markets PeopleFluent - Core Challenger PeopleFluent - Core Leader LTG - Strategic Leader Oct 2019 Jan 2020 Jan 2020 *Fosway Group: Europe’s #1 learning analyst, Glossary – see appendix 11

Scale and Diversity: leveraging the power of LTG’s talent and learning solutions Launch Solution Cross Sell Opportunity – leveraging opportunities of scale Partnering to provide blended solutions Date Sellafield – Leadership Development 2018 2019 Change products per Client LTG Average 1.2 1.3 8% No of Top 10 Clients 3.2 4.1 28% LTG Sales by sector 2019 – strength in diversity Selborne - Royal Navy Bid for 12 year contract 12

Learning & Talent Software & Platforms Standalone best-in-class businesses being joined for coherent data driven picture across Learning and Talent. Contingent Workforce Diversity & Inclusion Compensation Performance Recruitment Succession Learning Learning Learning Experience Platform, analytics, standards and syndication 13

R&D and Results Watershed and Rustici integration. Enabled many of the biggest customer sales including Caterpillar to underpin 2019 39% growth. R&D and Results 2017 2018 2019 2020 2021+ 14

R&D and Results Original sale of Gomo to Shell. Integration/cross-sale for a global academy with design/content services from LEO. 2017 2018 2018 2019 2019 2020 2021+ 15

R&D and Results R&D and Results Watershed cross-sell of Instilled. Integration creates mid-market product–set. MID-MARKET 2017 2018 2019 2019 2020 2021+ 16

R&D and Results Cross sale by LEO. Enabling luxury watch maker reach 4,000 people in watch outlets across the world. MID-MARKET 2017 2018 2019 2019 2020 2021+ 17

R&D and Results Going mobile for contingent workforce capability. Already implemented by more than 30 customers. IMPLEMENTED BY > 30 CUSTOMERS 2017 2018 2019 2019 2020 2021+ 18

R&D and Results 2020: a significant step. Enabling all content from the Learning Management System to be surfaced in the Learning Experience Platform. 2017 2018 2019 2020 2020 2021+ 19