TEXT SPÓŁKA AKCYJNA (TXT) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, thank you for standing by and I would like to welcome you to the discussion on TEQ's Q2 2026-2027 KPI conference call. The call today will be hosted by Marcin Droba and Lucia Kaseya from the Investor Relations Department. At the end of the presentation, we'll have an opportunity to ask questions. So without further ado, I would now like to pass the line to Lucia. Please go ahead, ma'am.

Good afternoon, everyone. As always, it's great to meet you and talk about the latest data and developments at the TEXT group. As usual, we also ask you to take a moment to review the disclaimers related to this presentation. The full presentation together with the recording and transcript will, of course, be available on our website by the end of the day. Today, we will focus mainly on the numbers we published in Friday's current report. First and foremost, MRR and payments received in Q2 of financial year 2026-27. And just to avoid any confusion, payments received are not equal revenue for the quarter. But before we go into the numbers, I'd like to spend a few minutes talking about us, our products and our customers. As some of you may remember, monetizing and converting online businesses has always been at the heart of live chat. This was really the original idea behind the product. Over time, of course, our customers discovered many other use cases where we could help them. And that's fantastic. But this original use case has always remained very important to us. And today, we are putting a lot of focus on it again. One reason is the technology now makes it possible to do more and much more in this area than ever before and text is particularly powerful here it brings together in one place cue data from customer systems to e-commerce platforms multiple communication channels and of course the capabilities of AI. What we want to show is a couple of examples of our customers. A great example of what can be achieved with text is Nuvo, an e-commerce company from Finland. Nuvo sells refurbished computers to customers and businesses in Finland, Sweden and Germany. Customer service has always been very important to them. They They have even received awards for it. But in April this year, they came to us with a very specific problem. They wanted to maintain that high level of customer service outside their team's working hours. Initially, the AI agent in tech simply handled website traffic after hours. But once the team became more comfortable with the new tool, they started using campaigns and what we call custom skills. and that had a huge impact on sales generated through chat. In the example we're showing in front of you, just four months later the AI agent is handling more than 70% of all chats. All and sales generated through the AI agent have grown more than five-fold. Harry, who's the manager responsible for the project, particularly appreciates the reporting capabilities behind our product. He can see exactly which chats led to sales and measure a wide range of other parameters. Last Thursday we had an online meeting with Nuvo for the entire text team. We showed them some of the new capabilities and what will be soon available in text. And I have to say we used to think that Finns are a rather reserved nation but this time they showed some very genuine enthusiasm and probably probably we should not really quote them literally here. Another example, we are very proud that we supported the organization of Winter Olympic Games with excellent results. You can read more about this in the testimonial on our website. We don't want to go into much detail here. But what we want to show is the scale and prestige of the projects that can be supported with TEXT. And there is also another important point. TEXT was selected by some of leading experts in this field. They told us that capabilities of our API are unique and they are already thinking on how they can use them in future projects. I'd also like to share two more customer stories. Hopefully, we will be able to talk about both of them publicly very soon. For now, however, we are still waiting for formal marketing approval, but both stories have a happy ending. But they also show some of the challenges we still need to address and why our numbers are not yet where we want them to be. The first story is about a customer from Australia. Initially they told us that they are planning to leave live chat. The exact reason was price increase that they got but they also told us that they were looking for alternatives because they couldn't achieve everything they wanted with live chat due to some certain missing functionalities. Then we showed them text and it turned out that text could not solve the problem. It turned out that text not only was able to solve the problem they had but also it could do much more. They were achieving exceptionally strong results with AI agents. And today, after moving from live chat to text, this customer is paying several times more than before, including a significant usage-based component. They have signed a one-year contract and are very happy with the results. And remember, this whole conversation started because they thought our product was too expensive. and this is a very good example of something we would need to improve we need to do a much better job of showing the value of text to customers who simply don't have the time to explore the product themselves and the second story I want to tell you about is actually about a new customer this one is particularly prestigious for us. You could say this is a customer, an industry expert, a technology company with a very good understanding of the market. They looked at several competing solutions. All of them were considered top-tier products and they chose the one they thought was the best. Obviously we wouldn't be telling you the story if it wasn't text and that makes us very happy but it also highlights our biggest challenge we believe we have one of the best if not the best products in our category but we still don't have the level of visibility that this product deserves and with that we can now move on to the numbers and look at what we achieved during the quarter which just has ended. Back in our quarterly report for Q1 in August, we said that MRR declined during the first two months of the quarter, but it still remained above the level from a year ago. September finally stopped that downward trend. We ended the month flat, so overall MRR at the end of the quarter declined by 2.3% while still growing by 3.3% over the year. This result is directly related to what I was talking about a moment ago. Our visibility is still not where we want it to be. As a result, customer acquisition remains weak and this is the case despite the positive trend we've seen in customer churn over the last three months. Our customer churn rate fell clearly below four percent. This may partly reflect the changing structure of our customer base with more larger customers and it also reflects the fact that many customers have moved to annual contracts, something we talked about quite extensively three months ago on the call. So while MRR was weaker than we had hoped, we had another strong month in terms of the payments received. We received 23,610,000 US dollars for a quarter. This means a growth of 6.2% year on year and a decline of 2.4 percent compared with the previous three months. Let's also remember that the previous quarter was the period when grandfathering ended for live chat customers and many customers decided to move to annual contracts. And let's repeat this once again. Payments received are not equal to revenue. Just to put this into a context, after Q1 we had a record level of deferred revenue, customer liabilities resulting from contracts. That was 77.2 million polished losses. That amount will flow into revenue over the coming quarters. Sorry for changing the slide. Another positive point I wanted to mention here is our API business. API revenue had another strong quarter and has now exceeded 450 000 us dollars this is almost double what it was just three months ago it's becoming an increasingly important part of our business that said we shouldn't expect this growth to be perfectly linear and you can now see also text on this chart For now its share is still very small but we expect it to grow quickly. I'll come back to that at the end of the presentation. We are also seeing another positive trend that we really want to see. The share of customers with ARPL above 500 US dollars continues to increase. This quarter they accounted for 56% of our total MRR. In this slide we are still showing the share of customers paying for more than one of our products. Of course as these customers migrate to text this particular way of looking at our business will eventually become less meaningful. For now it's worth noting that the share increased by 5% points year over year, reaching 40% at the end of September. That's it when it comes to the numbers, but let me briefly summarize the quarter and then we'll move to Q&A. Looking at the financials, MRR grew by 3.3% year over year, while declining 2.3% compared with the end of the previous quarter. And importantly, September ended flat. If we look at the actual cash coming into the business, it was another strong quarter. Payments received were up 6.2% year over year, and APL revenue, which is calculated outside of MRR, almost doubled during the quarter. It was also a quarter of a lot of activity around customer acquisition. We can see the potential, but we still need to wait for the results to fully materialize. It is worth mentioning that during these three months alone, our products became available on marketplaces and platforms such as Google Cloud, AWS and ChatGPT. It was also a very intensive quarter when it comes to product development. Amongst the new integrations, I particularly mentioned Klaviyo, the world's largest SMS and email marketing platform. All in all, we released 63 new features and functionalities in text. Many of them are very significant. That number shows how effectively our product and engineering teams work during the quarter. And importantly, we are also working on something else, how to communicate the value of text much better. I mentioned this challenge at the beginning of the presentation. The latest data shows that we've made significant progress here. We are happy with the improvement in lead to customer conversion for text, and that encourages us to redirect more traffic from our other domains to text.com. This is an experiment and obviously it comes with some risks. But the conversion results we are seeing give us confidence to continue. The strong results our customers are achieving with text are also encouraging us to accelerate the migration of customers from our other products to text. In September, we moved virtually all starter plan customers from live chat to text. From an MRR perspective, this is neutral. Their payments will only start being classified as text from the following month, but this is just the beginning. The migration process is now accelerating significantly. And that's the summary from us. Of course, we are happy to take the questions. And as always, we encourage you to ask them in the best possible way, by texting. Thank you for listening.

Thank you. Thank you very much for the presentation, Luzia. We'll now be moving to the Q&A part of the call. Dear participants, if you wish to ask a question, please type them in the box provided. We'll give a few seconds for any questions to come through.

We acknowledge the questions that you've already typed.

We'll get to them very shortly. Okay, our first text question comes from Marcin Novak, Epopema Securities.

Following the observation about the feasibility of the product, how do you want to achieve that? would techs reconsider rehiring the sales team that was just laid off what changes can improve this visibility thank you Marcin for for the question first of all what we the fact that we are showing the cases is one of such things so we need success stories from our clients and we are displaying them showing the real examples and real numbers for our potential customers to have a look. This also got some attention from websites or from some sector news agencies, so we got some PR around that as well. So this is part of what we're trying to do. We're also like the whole change of the way text website looks. So this red color and very bold statements, and especially the fact that we emphasize that we want to put the product on the offense, so on actually driving the sales for our customers. This is something that we are trying to achieve to bring awareness of text to customers.

Let's add that as it was shown in the presentation, we added three huge marketplaces in the Q2 alone, so that's not saying that will change the situation overnight. Contrary to that, that needs a lot of time, you need to build your credibility or visibility on each marketplace but that says a lot work was was made during that that uh that that quarter even that single quarter so we need to wait for the effect but a lot of work was done um about sales team about sales team no we definitely not consider rehiring that the sales team at the moment but actually that was something our CEO mentioned after AGM at the last AGM that it's not the first time actually he he he he actually cut the sales team he he did it so 10 plus I was like maybe fifth what 12 fear for 13 years ago that was good decision then and we think that that's a good decision again but of course in the future who

knows maybe we will repeat the story with them okay thank you thank you very much another question from mr martin novak do you have an estimate how the conversions to annual subscriptions have affected mrr how much it reduced the quarter-on-quarter mrr dynamic well first of all you got the direction correctly so this is something and we've talked about it last quarter that the

increase that affected the live chat customers for some of them was somehow limited because they chose annual subscriptions instead of the monthly subscriptions they were previously on and indeed that made a reduction in the effect of grandfathering on MRR. So all in all, the effect of this price of this end of grandfathering on MRR that we wanted to have was slightly lower than it appeared to be. But we are not giving the numbers, I'm afraid.

Thank you very much. Our next question comes from Mr. Dariusz Japskowski. Did the API payments grow to over $450,000 because customers are using the API more or because of one-off high usage from few customers?

I would say definitely more customers are using API, but as we mentioned already, even if you look at single months, if you look at the picture from month to month, the growth of that part of our business is definitely not linear. are it it changed that that that that there is sometimes a a month when we see some decreased and we are seeing huge jump uh the usage is changing month to month no not only growing but at the same time even without that especially bigger customers are you know are buying some huge packages of of of of calls of ap api calls so sometimes uh uh yes that's true it's it's possible that some bigger customers will pay in the one month uh package of api calls which will

serve him for two to like a few months it it can happen it's happening thank you thank you very much another question from Darius when customers start using AI features in text do they usually increase their usage over time or does it stay at a similar level it's a very valid question however we do not have that much data I mean, we just have a limited number of customers who are long enough to make such comparisons. The one example I know exactly about the customer is that they did in fact increase the usage over time seeing the results they are getting and that should probably be the answer for larger customers. Once they see the value they are not afraid to invest more and pay more uh but for smaller ones i would say that that does not necessarily be be the case but again the the the statistics that we have are rather limited at this time thank you thank you very much before i move to the next question just a reminder if you would like to ask a question please type it in the box provided our next question comes again from martin novak ipopama securities if i see correctly on the page nine payments from helpdesk decreased significantly quarter on quarter in second quarter 2026 2027. why is that well you are payments let's go go ahead yeah the answer is uh simple it's one if there are some bigger contracts that are paid annually then it's inflated and that was the case in Q1 when we had bigger payments and also annual payments and so it it is really a dependent on when are the payments of for example larger clients and throughout the year thank you thank you

very much just the final reminder for the questions if you'd like to ask a text question please type it in the box provided and send it to us I'll just give a moment or so for any additional questions to come in as usual we we had more and more questions at polish meeting at polish webinar the transcript of that that polish webinar will be put online maybe even in a few minutes so so so so you can check check for that obviously okay thank you thank you Marcin I think at this point in time we have no further questions to the audience so I will now pass the line back to you for your closing remarks so thank you for being here with us we put we will put on all the materials from our calls online if you have any any questions feel free to to to to you know to to to to send

these questions to us thank you very much thank you thank you very much this concludes our call for today we are now closing all the lines goodbye have have a good day and good week thank you bye Thank you, bye.