Earnings Transcript for GNS - Q4 Fiscal Year 2022

Operator: Greetings, welcome to the Genius Group Full-Year 2022 Financial Results. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator Instructions] I will now turn the conference over to your host, Flora Hewitt, Vice President of Investor Relations, Mergers and Acquisitions. You may begin.

Flora Hewitt: Hi, everyone, and thank you for joining our full-year 2022 earnings conference call. With me today is Roger Hamilton, Genius Group’s Chief Executive Officer; and Erez Simha, our Chief Financial Officer. Following the prepared remarks, we will open the call for questions. Our press release, including financial tables, was issued post-market closing and is posted on our investor relations website, located on investorrelations.geniusgroup.net, where this call is being simultaneously webcast, and where versions of our prepared remarks and supplemental slides are available. During this call, we will present both IFRS and non-IFRS financial measures. Please note that all gross percentages refer to year-on-year change, unless otherwise specified. Additionally, all statements made during this call relating to future results and events are forward-looking statements, based on current expectations. These forward-looking statements include, but are not limited to, statements regarding trends and their potential impact on our industry and our business, our ecosystem, platform, content, and partner relationship, our strategy and priorities, and our business model, mission, opportunities, outlook, and long-term financial framework. Actual results and events could differ materially from projections, due to a number of risks and uncertainties discussed in our press release, SEC filings, and supplemental materials. These forward-looking statements are not guarantees of future performance and plans, and investors should not place undue reliance on them. We assume no obligation to update our forward- looking statements. With that, I’d like to turn it over to Roger.

Roger James Hamilton: Thank you, Flora, and good morning, everyone – or good evening, wherever you are. First, I’d like to apologize for the delay in the releasing our full-year results. Due to the complexity of accounting treatment to write down the value our recent acquisitions, to align with our low share price and market cap in December 2022, our order took longer than planned, and this is the reason for the delay. However, our CFO, Erez Simha, will provide more details on this following my business summary. Genius Group has had a great year and we’re excited to share the results with you today. I’m going to start with a quick recap of the year and we have come a long way since the IPO in April 2022. We have established a strong leadership team with Erez Simha as our Chief Financial Officer; and Rav Karwal as our Chief Revenue Officer. We’ve also got Richard Berman and Tim Murphy joining as new Directors. And these individuals bring a wide range of diversified, corporate experience, which helped drive the growth of our business last year and this continues in 2023. We have completed five acquisitions

Erez Simha: Thank you, Roger, and good evening, everyone. I can only echo Roger messaging about the company’s great results this year. We have had strong growth in 2022, and this can be seen in growth of revenue, students, and partner that Roger presented earlier. The growth comes across stronger in our financial results. During Q1 2023, we updated our revenue recognition policy memo and uncovered an error in the implementation of the accounting treatment for certain revenue contribution transactions, with a third-party sales partner. We, therefore, believe that a restatement was necessary for our 2021 results. In accordance with IFRS, the restatement record revenue and expenses net for 2021 sales transactions, where the company was not declared principles in transaction. As a result, the restatement decreased revenue in 2021 by $4.5 million and decreased our cost of revenue by the same amount. In other words, this means that our revenue in 2021 has been restated from $12.8 to $8.3 million, and our 2021 cost of revenue has been restated from $10 million to $5.5 million. Our 2021 gross profit EBITDA, cash flow, and net profit has remained the same, as Roger previously presented to you. The decrease in revenue in period represents higher revenue growth year-over-year in 2022. Now, onto our 2022 results. The audited revenue increased from $8.3 in 2021 to $18.2 in 2022, which represent a 118% growth year-over-year. This is a much higher growth rate than the education industry growth rate of 4.3%, and the ed-tech industry growth rate of 16.3%. This tremendous growth this year is the reflection of stable and fast-growing student and user-based growth on our platform and the acquisition of new customers through the acquisition that we have closed this year. This growth was driven by an increase in education revenue of 161% from $5.2 million to $30.6 million and increasing campus revenue by 50% from $3.1 in 2021 to $4.6 in 2022. The large increase in education revenue is divided into two sections

Operator: At this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line Hunter Diamond with Diamond Equity. Please proceed with your question.

Hunter Diamond: Hi, everyone, congratulations on the strong results. So my question relates to why the shift to the larger acquisitions, maybe you could describe why you’re focused on larger deals and kind of the impetus behind that change?

Roger James Hamilton: Hi, Hunter, thanks very much for the question. It’s been very interesting seeing the amounts of companies that are on the market at the moment, especially with the depressed prices on companies, in general. And what we’re seeing is that, whereas before, there was certainly companies, which includes public-listed companies that wouldn’t really consider an acquisition or a merger, we have seen a very big change en route of that this year. The – earlier this year, I started having quite a number of conversations with CEOs of public-listed companies. And we’re not just talking about companies that may be listed in the U.S., these could be companies that are listed in other parts of the world as well. And, of course, if you are doing due diligence and going into detail on companies which are already – are public listed themselves, they obviously are larger. But also, there’s already been a lot more compliance systems talent that have all been built in those companies as well. So really, this does not mean that the focus at the larger ones, means that if good opportunities come on smaller companies, we’ll still consider them. But certainly, the market is healthy. We believe the change and that’s allowed us to be able to actually be looking now at these larger potential targets as well. Hope that answers the question.

Hunter Diamond: No, that makes perfect sense. And my second question, and it was a fairly comprehensive call, so I just have two today. In terms of AI, I just – what are you seeing the opportunities in education? I know it’s had sort of mixed results on different equities. For instance, CHGG, I think it’s sort of have a negative impact. Other companies, like Microsoft, NVIDIA, it’s been very positive. I mean, I guess, just where are you seeing – how much do you think you’re going to invest your cash in sort of the R&D of the AI versus kind of leveraging ChatGPT, other software that’s sort of our there, that’s fairly robust?

Roger James Hamilton: Yes, that’s a great question, and I’ll answer that in two parts. The first one is, you are absolutely right, there are companies out there – when you look at all of ed-tech, there are certainly companies out there who are providing courses or programs or even accelerated access to doing homework, like – things that, basically in the past you’d need to be paying subscriptions to get access to various content. Obviously, with ChatGPT, with the way that AI is going, you don’t need that anymore, because why go and pay for that content, when you’re actually able to get it for free. And more importantly, if you’re getting it from AI that is able to be more personalized for yourself, then even better. So I definitely think there’s going to be certain platforms, which includes ed-tech platforms, that will find things more challenging, as we all start to find AI being more and more useful. There’s also the other side – actually, seeing some of the companies that also are really focusing at the personalized learning. When I met with Salman Khan from Khan Academy, where he has over 100 million students already, the amount of time and effort they have put into having their own basically customized tutor that can help you along your way, when we basically had a look at what they were doing, we thought was fantastic, as an example. But we also saw that what we had, which was really a big step up, was the fact that a large amount of the students that come and join us, they come because they want the personalized learning. They take the passion test, they take the Genius test that we have, the purpose test. And so, how Genie AI gets to know exactly who you are. And I recommend you give it a go. If you actually go onto GeniusU now, you can straight away see on the left-hand side that Genie is there waiting to speak to you. And if you logged in, it’s not like ChatGPT, which basically starts by, like, just being a prompt and asking what you want to ask. It actually starts, hi, Roger, so how can I help you today? And anything that I ask my genie, it will give a different answer to – for example, if you ask the Genie, because it is ask – it is answering based on my passions, my purposes. And I can be asking who – what mentor should I connect with today? Or, who’s in the city that I’m in at the moment that could help me on my path? And it would actually be able to look up everything within GeniusU, everything permission- based within our community, and give us information, which no other AI is able to provide, because it’s a combination of not just the intelligence of the AI, but also with all the data that the student has actually provided to have a personalized talk. So any ed-tech platform that is focusing at being more personalized, that is being more relevant and being more meaningful to that person’s life, I think is going to find AI to be a very powerful point of difference. And we definitely have already seen that with even the first early days of us launching our Genie AI as well. On the second part of our question, which was to what extent are we investing in building our own platforms or to what extent are we leveraging with the very best that’s out there already? Both in terms of the AI and also in terms of our metaversity, we have seen some major launches from the biggest platforms. And that’s everything from Microsoft and Google, through to Apple, even this week. And we are leveraging on all of these platforms, so that anyone who, as a student, start to embrace any of these platforms will find that they seamlessly will integrate in with our GeniusU platform, as well. And we want to continue at the forefront of that, because this was always part of our vision from the very beginning when we first launched Genius Group.

Hunter Diamond: Absolutely. No, it seems like you’re moving towards where educational technology is heading. So, you’re positioning the company in a very favorable way for the way education is changing. Again, thank you for taking my questions and look forward to watching the continued progress.

Roger James Hamilton: Yes, that’s fantastic. Thanks a lot, Hunter.

Operator: And we have reached the end of the question-and-answer session. And also, this concludes today’s conference, and you may disconnect your lines at this time. Thank you for your participation.