K2fly (ASX:K2F) – providing ESG solutions for top 50 mining companies

K2fly (ASX:K2F) – providing ESG solutions for top 50 mining companies


K2fly Limited (ASX:K2F) CEO Nic Pollock discusses K2F's progress and milestones over the past year.

Lauren Hayes: We're joined today by K2fly Limited (ASX:K2F), market cap of $30 million. K2fly is a leading provider of resource governance software solutions in ESG and sustainability, operations and disclosures. We're joined today by Nic Pollock, CEO of K2fly. Nic, welcome to the network.

Nic Pollock: Thanks for having me.

Lauren Hayes: Nic, for new investors, can you give us a bit of an introduction on K2F?

Nic Pollock: K2fly is a ASX-listed software business. We're in the enterprise software business. Our focus is predominantly the mining and resources space, albeit not limited to. So, we deliver solutions in what we characterise as "resource governance". And under resource governance we have nine different solutions that we provide across resource disclosure, tailings management and governance, heritage, land and ground disturbance, rehab, etc. etc. So, what that means for the client is we're helping them operationalise their ESG operations or replacing operational systems that are ESG-ready for reporting and disclosure, which is going to become much more important as we go forward — not just the reporting, but the providence of the data and making sure that it's fit for disclosure, if you like, and protecting their social licence to operate and also any overtones of greenwashing.

Lauren Hayes: Could you give us an update on K2fly's progress over the last 12 months?

Nic Pollock: Yeah, sure. So, as a software-as-a-service business, the key metrics that we focus on are annual recurring revenue and total contract value. So, our annual recurring revenue grew 76 per cent last year to $6 million — $6.5 now and after Q1. And our total contract value grew 80 per cent last year. That's currently sitting at around $19 million. So, that reinforces not just the ARR, which is great, but also the long-term nature of the businesses that we operate in, the stickiness of the software. The other thing we're really proud of is the net retention rate, which sits at 126 per cent at the end of '22. The best performers in the industry are just north of 130 per cent, so we're right up there in that top space. What that means for an investor is that even if we don't sign another client in a year's time, which is unlikely – we'll continue to do so — we'll generate 26 per cent of revenue out of our customer base. So, that's fundamental to our land and expand strategy in our global customer base.

Lauren Hayes: And so which milestones have been the highlight over the last year?

Nic Pollock: A couple of things. So, the business is truly international now. So, 60 per cent of our revenue is out of Australia, but 20 per cent is coming out of the Americas, which is a real growth area for us, and 20 per cent are out of Europe, Middle East and Africa. So, we've broken the shackles of being just an Aussie mining software business. We're truly global. So, we're really proud of that. This year, in the last 12 months, our natural resource governance solutions have really taken off in a big way. So, we talk about resource governance, we break it into two areas, mineral resource governance, which is very strong for us, and natural resource governance, which is in around the land that you manage. And so, this year, we have signed up both Rio Tinto for heritage and ground disturbance, post the incident that happened in the Pilbara. So, that's a really good endorsement of us. We have signed up BHP for a similar solution in that region. And then recently we announced Imerys, which is a truly global rollout of the same solution. Ultimately, they're a Paris-based industrial minerals company with over 200 sites. Another thing from an investor's perspective is that we brought on a strategic investor from Maptek, which is the world's biggest private mining software business. So, a tremendous validation of what we're doing. Maptek realise that what we're doing is really important and they also realise that it takes a while to get to where we are. So, they're leveraging our position so that they have exposure to the growing ESG space.

Lauren Hayes: Nic, could you touch on some of your clients?

Nic Pollock: Certainly. So, our clients are a great definition of the importance and value of K2fly. So, we operate at the moment in the top 50 mining companies in the world. Our clients include Rio Tinto, BHP, Glencore, Newmont. So, the biggest producers in the world. Rio Tinto is our biggest customer. Started with one, now they've got five solutions in play, and that's not across all of the business. So, people need to understand that when we make an announcement about, say, BHP a few months ago, that was just BHP for ground disturbance in the Pilbara. So, there's a lot more opportunity for us to be able to grow into those accounts and a multi-year platform of work and pipeline of work for us to do.

Lauren Hayes: And what else should we be looking for from K2fly in the next six to 12 months?

Nic Pollock: Well, continued growth, which is a really fundamental part of our business. As I said, the ARR and TCV growth is key to our metrics. What's really exciting this quarter, and we announced this a few weeks back, is the release of our new resource governance platform. So, that really changes the game for us and our clients in order for us to be able to scale the business even faster than we have. So, on the back of the success of the resource disclosure solution we have, which most of our clients use, and that's often our entry point, we rebuilt the whole platform in a cloud-first way to make that more scalable, but also to leverage the implementation that those customers have across multiple use cases in resource governance. So, going from a single solution, we can roll them into these other governance and disclosure areas across all of these ESG issues and leverage the same platform. So, that's great for them. It's also great for us in terms of quicker, faster to implement and also to manage and support. So, watch this space, there's a lot going to happen in that area.

Lauren Hayes: Sounds fascinating. Nic, thank you for your time.

Nic Pollock: My pleasure. Thanks very much for having me.

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